Asia-Pacific Current Affairs
According to recently released report ‘RemitSCOPE – Remittance markets and opportunities – Asia and the Pacific’, India was largest remittance receiving country in the world with US $69 billion in 2017. Top five remittance receiving countries in 2017 in the world were India ($69 billion), China ($64 billion) and Philippines ($33 billion), Pakistan ($20 billion), and Vietnam ($14 billion).
Key Highlights of Report
Asia-Pacific region: Remittances to Asia-Pacific region amounted to US $256 billion in 2017. It represented 53% of flows worldwide, growing 4.87% since 2008, with rates flattening in recent years. About 70% of remittances sent to Asia and Pacific came from outside region and in particular from Gulf States (32%), North America (26%) and Europe (12%).
Remittances contribute to region more than 10 times official development assistance. 400 million people in region i.e. one out of every 10 people, are directly affected by remittances either as sender or as receiver. It benefits about 320 million family members in the region, most of them in rural areas.
Remittances and Rural Development: Remittances are particularly crucial in rural areas where poverty is highest. Worldwide, an estimated 40% of total value of remittances goes to rural areas. In Asia-Pacific region, remittances go disproportionally to countries with majority of rural populations such as Nepal (81%), India (67%), Vietnam (66%), Bangladesh (65%), Pakistan (61%) and the Philippines (56%). Remittances to rural areas are generally costlier due to expenses associated with offering access points in distant locations.
Usage of Remittances: 70% of remittances in the Asia pacific region are used to meet basic needs, such as food, clothing, healthcare and education. The remaining 30% can be saved and invested in asset-building or income-generating activities, helping families to build livelihoods and their future.
Improvement of remittance markets: It still needs to be transformed to ensure that families can benefit fully from the flows. Technological innovation in remittance marketplace can bring about fundamental transformation for hundreds of millions benefiting from these flows. Moreover, outdated regulatory barriers on both sending and receiving ends is resulting in higher and less transparent costs which make it less likely and more difficult to convert remittances into savings and investments. Besides, financial inclusion which has increased in recent times has not fully represented reality of substantial majority of remittance receiving families in Asia-Pacific region where financial exclusion remains predominant.
The International Monetary Fund (IMF) in its Asia and Pacific Regional Economic Outlook report has reaffirmed that India will be the fastest growing major economy in 2018, with growth rate of 7.4% and 7.8% in 2019.
India’s medium-term growth prospects remain positive. India is recovering from effects of demonetisation and introduction of Goods and Services Tax (GST). The recovery is expected to be underpinned by rebound from transitory shocks as well as robust private consumption.
Medium-term consumer price index inflation is forecasted to remain within but closer to upper bound of Reserve Bank of India’s (RBI) inflation-targeting band of 4% with a plus or minus 2% change. Given increased inflation pressure, monetary policy should maintain a tightening bias. India’s current account deficit in fiscal year 2017-18 is expected to widen somewhat but will remain modest, financed by robust foreign direct investment inflows
South Asian Region: After India, Bangladesh is projected to be fastest-growing economy in South Asia followed by Sri Lanka and Nepal. (Pakistan, which is grouped with Middle East, was not covered in this report). Overall, South Asia continues will be both fastest-growing region in the world and main engine of world’s economy.
The region contributes more than 60% of global growth and three-quarters of this comes from India and China, which is expected to grow 6.6 % in 2018 and 6.4% in 2019. US Government’s fiscal stimulus is expected to support Asia’s exports and investment.
However, in the medium term downside risks dominate for region and these include tightening of global financial conditions, shift toward protectionist policies, and increase in geopolitical tensions. Because of these uncertainties countries in the region need to follow conservative policies aimed at building buffers and increasing resilience and push ahead with structural reforms.