Remittances are vital for developing countries. Individual remittances may be of ‘relatively small value,’ but collectively these flows are of major importance. As reported in a recent IMF study in 2018, remittances to low income countries were nearly four times higher than official development assistance and in 2019 they exceeded foreign direct investment.

In 2021, flows of money sent by residents of the EU to non-EU countries, referred to as personal transfers, amounted to €37.7 billion  (+15% compared to 2019), reaching 0.26% of EU’s GDP (vs. 0.23% in 2019 ). Despite the pandemic and the global recession that followed, migrant remittances from the EU have shown great resilience. Data from the World Bank confirm that this is a global trend and remittances to low-and middle-income countries grew 10% in 2021. In fact, extra-EU outflows have displayed a growing trend since 2015 which did not stop in 2020 either (year of COVID-19): +4% compared to 2019.

In 2021 extra-EU outflows were directed mostly to North Africa with 22% of total extra-EU outflows (€8.0 billion), followed by Asia with 21% (€7.8 billion) and non-EU European countries with 19% (€7.1 billion). From the member states that there are available data, the leading economies for outflows of remittances were France (€9.6 billion), Italy (€7.5 billion), Germany (3.3 billion euros) and Belgium (2.1 billion euros).

As a percentage of GDP, the outflows of personal remittances in 2021 were higher in Cyprus (1.10%) and Greece (0.57%). In all other countries the outflows personal remittances remained below 0.5% of GDP. Compared to 2019, extra-EU personal remittances as a percentage of GDP increased in 14 Member States and decreased in 9 (data are not available for Spain, Denmark, Portugal and Malta).

For most of the countries the changes were marginal: the exceptions concerned two member states  that the share of personal outflows in GDP decreased, Lithuania (from 0.72% of GDP in 2019 to 0.34% in 2021), Cyprus (from 1 .24% to 1.10%), as well as four member states where the increase was more than a tenth of a percentage point: Belgium (from 0.27% of GDP in 2019 to 0.43% in 2021), Greece (from 0.44% to 0.57%), Latvia (from 0.26% to 0.37%) and Italy (from 0.32% to 0.42%).

On the other hand, extra-EU inflows have remained at a rather constant level with €13.0 billion, resulting in a negative balance of €24.7 billion for the EU with the rest of the world. Non-EU European countries are responsible for 54% of total extra-EU inflows (€6.8 billion). The second main provider of personal transfers to the EU is North America with 20% (€2.5 billion). In 2021, the EU countries that generated surpluses of personal transfers, representing more than 1% of their respective gross domestic product (GDP), were Croatia (2.7% of GDP), Bulgaria (1.6%), Romania (1.5%) and Latvia (1.1%).  In contrast, Cyprus (-0.9%), France (-0, 5%) and Spain (-0.5%) generated the largest deficits of personal transfers vis-à-vis the rest of the world as a share of their respective GDP.

Several factors appear to influence the resilience of migrant remittances despite the adverse economic environment. The relatively quick economic recovery of the European economies was important. The unprecedented fiscal stimulus also supported migrants’ employment and their ability to continue helping their families back home. Also the accelerated adoption of digital technology by the migrant workers and their families buoyed remittance flows during this challenging period.

The evidence supports the hypothesis that migrant remittances are “countercyclical”: when times are tough, migrants send more remittances back home. The rise in inflation after the invasion of Ukraine will now be a new test as it adversely affects migrants’ real incomes. The World Bank is warning that there will be a slowdown in the growth of remittances in 2023.