What country receives the most remittances?
A remittance is money sent from someone working abroad to their family back home. Migrant workers send home $794 billion in remittances in 2022 according to the World Bank. In low- and middle-income countries, when China is excluded, remittances are a larger source of external finance that even foreign direct investment and are the biggest contributor to their economies.
Remittances are counter cyclical. When cyclical industries like tourism take a downturn, remittances increase to help smooth out incomes.
Remittances may decrease inequality because the poorest people are more likely to go work abroad. However, for migrants in the United States, only those who are making enough money to adequately pay their living expenses will likely remit money to their home countries.
Over the last ten years, remittances sent to Latin America and the Caribbean have more than doubled which is an increase greater than any other region.
Mexico is now the country that receives the most remittances. This is partly due to the substantial stimulus payments the United States paid. Many migrants sent stimulus and unemployment money back to their relatives.
In Mexico, remittances were equivalent to 1.9% of the GDP in 2012 versus last year, in 2022, when they were equivalent to 4.2% of the economy. Remittances have more than doubled as a percentage of the GDP of Mexico.
Twelve countries in Latin American and the Caribbean get more than the of 5% of their GDP from remittances. In four countries, remittances are more than 20% of the GDP: El Salvador, Haiti, Honduras and Jamaica.
There are some negative effects of remittances. There is evidence that remittances cause the local currencies to appreciate which thereby makes exports less competitive. Receiving remittances reduces the likelihood a person is employed by nine percentage points on average compared to demographically similar people. There is an example of a café owner in El Salvador that has spent two months trying to find someone to hire. The café owner blames the influx of foreign cash.
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