South Asia to receive $32 b in remittances from World Bank

Washington - International migration can generate substantial welfare gains for migrants and their families, as well as their origin and destination countries, if policies to better manage the flow of migrants and facilitate the transfer of remittances are pursued, says the World Bank's annual Global Economic Prospects (GEP) report for 2006.

"With the number of migrants worldwide now reaching almost 200 million, their productivity and earnings are a powerful force for poverty reduction," said Francois Bourguignon, World Bank Chief Economist and Senior Vice President for Development Economics.

"Remittances, in particular, are an important way out of extreme poverty for a large number of people. The challenge facing policymakers is to fully achieve the potential economic benefits of migration, while managing the associated social and political implications."

The South Asia region will receive an estimated $32 billion in remittances in 2005, a 67 percent increase from 2001.

With recorded inflows of $21.7 billion in 2004, India received the most in remittances in the world, followed by China and Mexico at $21.3 billion and $18.1 billion, respectively. Of other South Asian countries, Pakistan received $3.9 billion and Bangladesh $3.4 billion.

Meanwhile, in Sri Lanka, remittance receipts are larger than tea exports, and in Nepal, remittances account for nearly 12 percent of GDP.

This year's GEP, entitled The Economic Implications of Remittances and Migration, also forecasts that economic growth in developing countries will slow to 5.9 percent this year, and to 5.7 percent in 2006, down from 6.8 percent in 2004. GDP growth in South Asia is estimated at 6.9 percent in 2005, up from 6.8 in 2004.

For 2006, regional gross domestic product is expected to slow to 6.4 percent. This year's performance reflects stable growth of about 7 percent in India, and a 6.6 percent growth in Pakistan.

This strong growth can be attributed to increased consumption, investment, exports and industrial production in both countries.

Growth in the region's other countries, meanwhile, is expected to decelerate from 5.9 percent in 2004 to 5.1 percent this year.

This slowdown reflects increased political instability in Bangladesh and Nepal, flooding in Bangladesh, and the after-effects of the tsunami in Maldives and to a lesser extent Sri Lanka. In Afghanistan, favourable weather boosted agricultural output and GDP.

One of the risks to the outlook investigated in the report is the possibility of a disruption in oil supply that could send oil prices even higher, potentially reducing global output by 1.5 percent for several years.

A second uncertainty arises from persistent global imbalances and rising public debt in high-income countries. This, the report cautions, could cause long-term interest rates to rise much faster than expected, and dampen growth prospects.

The recent strong economic performance of developing countries suggests that reforms undertaken over the past decades have had a positive impact on growth trends.

Long-term growth in South Asia is forecasted to average around 5.5 percent during 2007-2015, reflecting a rising contribution to growth from the private sector.