Bridges Weekly Trade News Digest • Volume 12 • Number 39 • 19th November 2008
UNCTAD Chief Predicts Drop in Remittances to Developing Countries
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Migrant remittances to developing countries are likely to drop next year thanks to the global economic crisis, the head of the UN’s trade and development branch said last week.
”It is thus clear that the idea that developing countries would somehow be ‘de-coupled’ from the crisis is a myth,” Supachai Panitchpakdi told an executive session of UNCTAD’s trade and development board.
Money sent home from migrants working abroad is a major source of external financing for many developing and emerging economies. Indians send home US$ 27 billion each year, according to World Bank figures, while China and Mexico each see an inflow of roughly US$ 25 billion annually from their citizens working abroad.
For several small developing nations - including Honduras, Moldova, Tajikistan and Tonga - remittances account for more than one quarter of gross domestic product, according to World Bank numbers for 2006, the most recent year for which data are available.
While the precise effect of the ongoing economic turmoil is difficult to predict, Supachai said that the crisis could cause total remittances to drop between one and six percent for 2009.
But developing countries will be hit by more than just the predicted drop in remittances, Supachai said. Other probable effects of the economic crisis include a decline in foreign direct investment inflow to the developing world - by as much as 40 percent - and new and expanded problems with credit.
”We are likely to witness new debt crises, not in the usual highly indebted, poor countries but in developing countries or economies in transition where currency and maturity mismatches have taken a toll on macro-fundamentals,” the UNCTAD chief said.
ICTSD reporting.
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[...] in remittances back home to support their families (on forecasts and drops in remittances see more here, here, here and [...]