Remittance inflows to surpass pre-pandemic level

Remittance inflows to Nepal in 2023 are expected to surpass pre-pandemic levels to reach $11bn in 2023.  According to a new report published by the World Bank the growth of 18 percent in 2023 will come on top of remittance growth of 13 percent in 2022. 

 At 27 percent, Nepal continued to have the highest share of remittances relative to GDP in South Asia

The rise in remittances is partly explained by low inflation in the GCC countries, prime destinations for Nepali migrants, which boosted their ability to send remittances. In addition, the sharp deceleration in GDP growth and continuing high inflation, especially high food prices, in Nepal encouraged Nepali migrants to increase remittances, the report says. 

At almost $189bn in 2023, remittance flows to South Asia once again are likely to exceed expectations, outstripping previous forecasts in Migration Development Brief 38 by $13bn. As in 2022, this remarkable increase is attributable entirely to remittance flows to India, which are expected to beat previous forecasts by $14bn and reach $125bn in 2023. 

After growing at 12.2 percent in 2022, growth in remittances to South Asia is likely to decelerate to 7.2 percent in 2023. This regional average is the outcome of high growth in one half of the South Asian countries (Bangladesh, India, Nepal, and Sri Lanka) and declines in the other half (Afghanistan, Bhutan, Maldives, and Pakistan).

The report further adds that  key drivers of remittance growth in 2023 are a historically tight labor market in the United States, high employment growth in Europe reflecting extensive leveraging of worker retention programs, and a dampening of inflation in high-income countries.

The slackening in remittance growth relative to 2022 is attributable to a near collapse in growth in 2023 in Saudi Arabia and Kuwait, and the halving of growth in the remaining GCC countries triggered by the drop in oil prices and production cuts in the Organization of the Petroleum Exporting Countries (OPEC).  In comparison, remittances as a share of GDP ranged around 7 percent in Sri Lanka and Pakistan, and 5.2 percent in Bangladesh in 2023. In India, the share of remittances in the economy was only 3.4 percent, despite its position as the largest recipient of remittances globally, the report says. 

After two years of double-digit growth, remittance flows to Nepal are projected to moderate and grow at nine percent, reaching $12bn in 2024. While economic conditions in the GCC, the main destination for migrants from Nepal, Bhutan, and Maldives, are projected to be positive, low oil prices will restrain large-scale expansion in new hires, thus curbing growth in remittances. 

Remittances to Bhutan are projected to stabilize at $75m (2023 levels). In Maldives, remittances are expected to fall to the pre-pandemic level of $4m in 2024 due to mounting debt and fiscal challenges that erode migrants’ confidence and lead them to opt for informal channels of money transfer, the report says.