three factors affect the delivery of remittances: the inflationthe wages and the currency depreciation locally and internationally, according to economists consulted about the decrease in the remittances received by the country during 2022.
According to statistics from central bankthe remittances decreased by 5.2% at the end of December, which represents 546 million dollars less than in 2021.
In 2022 the remittances reached 9,856.5 million dollarsamount less than 10,402.5 million for the twelve months of 2021.
For the senior economist at the Regional Center for Sustainable Economic Strategies, Miguel Collado DiFrancoBesides the inflationthe behavior of the wages in the United States, the main emitting country of remittancesis decisive in the dynamics of sending money.
Collado assured that in 2022 there was a reduction in the growth rate of hourly wages compared to 2021. “While payments to workers increased less than they did in 2021, the prices of goods and services increased,” said
“While payments to workers increased less than they did in 2021, the prices of goods and services increased. This resulted in a reduction in the real wage and, consequently, in the purchasing power of workers in USA”Economist
He explained that the price of goods and services and the decrease in the purchasing power of workers left as a consequence that people have fewer resources to be able to send money to their relatives and relatives.
In Europe, where prices increased due to the inflation currency and the effects of the war between Russia and Ukraine, there was also a similar impact that is reflected in the country’s economic records, he said.
Behavior by quarter
On his side, the approach of the economist henry hebrard compare the numbers of 2022 with years prior to the COVID-19 pandemic to highlight that, “despite the slight decrease observed in 2022”, we are +39.1% above the normal level of 2019”. During the last quarter of 2022, there was a slight growth of 0.2% compared to the quarter of 2021, he calculated.
He indicated that the end of the federal and state assistance programs for households in the United States to mitigate the impacts of COVID-19, which had allowed Dominicans to receive additional funds, fueled, to a large extent, the jump in the remittances during the pandemic years (2020 to 2022).
“With the disappearance of state aid funds from the United States, it is normal to think that remittances could return to a lower level”Economist
“When these funds disappear, it is normal to think that the remittances they could go back to a lower level,” he said.
Hebrard considered that the decline in 2022 was concentrated during the first nine months of the year, also affected by the devaluation suffered by the euro against the dollar.
Balance sheet and US employment rate
In his monthly report, the central bank explained that the economic performance of the United States was one of the main factors that influenced the behavior of the remittancessince 84.4% of the flows on average came from that country.
In Decemberthey were received 671.2 million dollars from that country. During said month, the unemployment of that nation was located in 3.5%its lowest level since the start of the COVID-19 pandemic, having ended 2021 at around 3.9%.
“The unemployment of the Hispanic population it went from 4.9% in 2021 to 4.1% in December 2022″, indicates the report, published on January 18, 2023.
Opposition when presenting perspectives
Both economists agree that the inflationthe salary and the devaluation of the coins impacted the flow of remittances. However, when talking about projections, opinions differ.
- Reduction in remittances: Collado considered that, with the current estimates of growth and inflationa reduction in the remittances in 2023 by the US economy and that of countries in the euro area.
- Increase in remittance flows: Hebrard predicts that the level of remittances expected for 2023 could be in a range between 9,500 and 10,500 million dollars, due to the recovery of some jobs.
The economists responded:
Miguel Collado: If the United States Federal Reserve (FED) finds it necessary to increase rates to a level higher than expected for 2023, the impact on sending remittances to the country would be greater than the low growth for 2023. In In 2023, a reduction in the growth rate of the United States economy is expected, including quarters in which a contraction may occur. Higher increases in interest rates would increase the fall in GDP, causing a greater negative impact on the labor market, which would impact workers of Dominican descent, or migrants, and their ability to remit resources to the country.
Henry Hebrard: We will have to wait until the first quarter of 2023 to have a better idea of which direction the remittance trend will take, but in any case, they will continue to be the primary source of foreign currency generation and an essential social stabilizer when inflation negatively impact the most vulnerable households in the Dominican Republic.
