The global economy is going through a difficult period during which there is a lot of disparity in key economic development indicators between many major nations. For example, in the US the GDP is growing but industrial output is falling and the stock market remains highly volatile; China’s GDP growth keeps slowing down, while Brazil’s seeing its exports recovery against a backdrop of a serious political and economic crisis.
In their new bulletin on current global economic trends, experts of the Analytical Center focus in on labor migrants’ money transfers, which they view as an important source of finance in the global economy. The estimates of transfers made by labor migrants in 2015 published by the World Bank in April allowed experts to study the most current trends and the overall situation. The experts note that the visible flows ofof transfers exceed the flows of capital and represent an important source of funds for a large number of less developed countries whose nationals are working in more developed countries and sending home money to support their families. Only some of the remittances made through banks, via money transfer services or in payment for foreign labor can be statistically analyzed. In addition to them, there are a lot of informal channels that people use to send money between countries. But even the transfers that are officially accounted for and recorded totaled USD 580 billion in 2015, exceeding, for example, the official development aid fund allocations, the specialists maintain. Experts note that one important characteristics of labor migrants’ money transfers is a consistently high concentration of the countries the money flows originate from (key donor countries) and a high degree of dependence on economic recessions and fluctuations in the price of oil. “It could be argued that the directions that labor now flows in have to a large extent become an important mechanism that keeps the global economy running smoothly,” they write.
The main global source of transfers that almost a fourth of all international money transfers made by labor migrants originate from (23% in 2015) is the US. Experts note that the ratio of incoming and outgoing transfers made by migrants allows them to identify not only the key donor nations and the key recipient nations, but also the key countries where the money flows get redistributed: these are countries that large number of international transfers get routed from but few remittances originate or stop it. Six of the top ten hubs for the redistribution of labor revenue are EU countries. These are France, Germany, Spain, Italy, Belgium and the UK. Russia is also an important redistribution hub for labor migrants’ revenue: in 2015 USD 15.4 billion worth of transfers originated in Russia and USD 7.1 billion was received. Russia is mostly exchanging money transfers with other developing nations and its CIS neighbors.
In effect, international transfers made by labor migrants reduce global inequality by moving financial resources from richer countries to poorer ones, the experts note. The specialists believe that in the medium term developed nations will continue to support countries that they draw labor resources from in this manner. If oil prices remain in the range of between USD 40 and 60 a barrel, it is reasonable to expect that the amounts of money transfers originating in oil exporting nations are going to be limited, unless labor migrants decide to start moving their savings out of the countries they are living in.
For more see the bulletin: Taking the Pulse: IMF’s Updated Forecast in focus: Migrants’ International Money Transfers
For other issues of our Bulletin on current trends in the global economy see Publications.