The growth effect of remittances
Remittances from abroad are part of the important component in a country economy especially for the developing countries.
And now with the development of the blockchain and cryptocurrencies that definitely changing the financial system, transferring money from abroad would become easier and faster.
Unlike for the developed countries that can rely on many sources of income such as their exports and technologies, for the developing countries remittances are said to play a big roles to the county’s growth and development.
“Remittances are an important source of income for millions of families in developing countries. As such, a weakening of remittance flows can have a serious impact on the ability of families to get health care, education or proper nutrition,” (Rita Ramalho, Acting Director of the World Bank’s Global Indicators Group).
That is why for some developing countries, remittances can be a major economic assets. But what about the others? How much remittances would really affecting a country’s economic growth? Can remittances bring a negative impact to the growth?
With many benefit that remittances could give a part of the recipient income, there is no shock if it could positively impact the economic growth.
”The transmitted funds can fund the dynamic investment, moreover , when these funds are deposited in financial institutions whether local or intentional in terms of savings, this will imply a significant increasing and raising in the financial resources of these financial institutions, hence it will encouraging,”(Yaseen, 2012).
However, there are some condition where remittances could affecting the growth in economics of a country in a negative way. Why?
Some of the studies such as from Barajas, Chami, Hakura and Montiel (2010) claimed that remittance could result to the ‘Dutch Disease’ where it could affecting the exchange rate. There will be a higher demand of the recipient country currency and thus bring the appreciation of exchange rate. This will make the recipient country’s goods become expensive to the foreign countries and reducing the export. Thus, it affecting the economic growth in the negative ways.
So, what was your thought about the effect of remittances on a country’s economy? Does your country also depends on remittances as part of national growth? Any other effect of remittances that you know?
Note:
Remittances are the amount of money transferred by a foreign worker back to any individual in his or her home country.