Remittance growth to low and middle-income countries is expected to drop to 3.1 per cent in 2024, World Bank projects, even as Kenya remains among key beneficiaries of inflows.
This is on the trajectory of weaker global economic activities amid geopolitical risks, with the latest being the attacks on vessels in the Red Sea that is threatening to affect international trade and businesses.
The Red Sea attacks by the Houthis in Yemen, which started in December, were fuelled by the Israeli-Gaza war, which alongside the Russia-Ukraine conflict have had greave implication on economies.
Remittances to low- and middle-income countries grew at an estimated 3.8 per cent in 2023, moderation from the high gains of the previous two years.
Major concern is the risk of decline in real income for migrants in 2024 in the face of global inflation and low growth prospects, according to the World Bank’s latest Migration and Development Brief ’s latest.
Driving the moderated forecast are a slowing economic growth and the prospect of weaker job markets in several high-income countries.
Additional downside risks include volatile oil prices and currency exchange rates, and a deeper-than-expected economic downturn in high-income countries.
“During crises, migrants have weathered risks and shown resilience to support families back home. But high inflation and subdued global growth is affecting how much money they can send,” said Iffath Sharif, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
Labour markets and social protection policies in host countries should be inclusive of migrants, whose remittances serve as a vital lifeline for developing countries, Sharif noted.
By one measure, the global economy is in a better place than it was a year ago: the risk of a global recession has receded, largely because of the strength of the US economy.
However, mounting geopolitical tensions could create fresh near-term hazards for the world economy, World Bank notes.
Meanwhile, the medium-term outlook has darkened for many developing economies amid slowing growth in most major economies, sluggish global trade, and the tightest financial conditions in decades.
Global trade growth in 2024 is expected to be only half the average in the decade before the pandemic.
Meanwhile, borrowing costs for developing economies—especially those with poor credit ratings—are likely to remain steep with global interest rates stuck at four-decade highs in inflation-adjusted terms.
Global growth is projected to slow for the third year in a row—from 2.6 per cent last year to 2.4 per cent in 2024, almost three-quarters of a percentage point below the average of the 2010s.
The projections means Kenya, among other top remittances recipients, are likely to witness a possible drop in money sent back home by migrants.
This is after an estimated 1.9 per cent growth or about $54 billion (Sh Sh8.8trilion) jump in 2023 for remittance flows to Sub-Saharan Africa, driven by strong remittance growth in Mozambique (48.5%), Rwanda (16.8%), and Ethiopia (16%).
Remittances to Nigeria, accounting for 38 per cent of remittance flows to the region, grew by about two per cent, while two other major recipients, Ghana and Kenya, posted estimated gains of 5.6 per cent and 3.8 per cent, respectively.
According to the Central Bank of Kenya (CBK), remittance inflows reached an all-time high of $4.19 billion (Sh685.1 billion) in 2023 compared to $4.03 billion (Sh658.6 billion) in 2022, an increase of four per cent.
“The inflows were strong in December 2023 at USD 372.6 million compared to USD 355.0 million in November, an increase of 5.0 percent. The US remains the largest source of remittances into Kenya, accounting for 56 percent in 2023,” CBK said in its latest remittances update.
Education, healthcare, and household needs are the main uses of remittances in Kenya, an analysis by WorldRemit indicates, even as inflows continue to remain a major foreign exchange earner for the country, supporting reserves.
Kenya earning more foreign exchange from diaspora remittances than each of its major exports – tea, coffee and horticulture, despite concerns of poor diaspora policies.
President William Ruto’s administration is seen to pay more attention to the diaspora, having created a state department to respond to specific issues of Kenyans abroad.
The government has so far signed MOUs with key labour destination countries including Germany, Austria, Bahrain, Oman, Poland, Jordan, Kuwait, Canada and Ireland, among others, as part of its endeavour to secure jobs and a conducive working environment for its citizens abroad.
"The number of Kenyans in the diaspora has significantly increased and is estimated to be four million and everyday, we have people going out to work both as skilled and non- skilled workers," Labour and Skills Development PS Shadrack Mwadime, said during an interview last week.
President Ruto targets to grow the annual remittances to a trillion shillings, as he banks on Kenyans in the diaspora whom he says play a key role in the development of the country.
