El Salvador remittances marking slower growth

Family remittances to El Salvador reached US$2.281bn in January-May, an increase of 3.8% from the same period of 2018,

According to El Salvador’s central bank, federations, non-bank savings and loan entities and other companies dedicated exclusively to the payment of remittances processed 57.8% of the total, while banking institutions handled 40% of remittances.

Meanwhile, cash remittances in the five-month period reached US$37.9mn, or 1.7% of the total, which were handed over physically by relatives, friends and trusted individuals or by the same sender while visiting the country.

Mobile phone top-ups paid from abroad, which represent remittances in kind, reached US$11.2mn in the five-month period, comprising 0.5% of the total, according to the central bank.

While the amount of remittances have been steadily rising over the last decade, the flows have seen a major surge in recent years with year-on-year remittance growth for the January-May period peaking at 10.6% in 2017, then coming down to 8.6% in 2018 - and this year slowing to 3.8%.

The following table tracks monthly remittances to El Salvador going back to 2010, using central bank data. It should be noted that there was zero growth in 2013.

US impact

The US labor market in particular has been feeding the growth of remittances.

The Bureau of Labor Statistics reported that for the second consecutive month, the Hispanic unemployment rate in the US stood at a historic low of 4.2% last month, improved from 4.9% in May 2018. The overall unemployment rate was 3.6%.

“The year-on-year comparison shows that both rates were reduced with greater advantage for Hispanics,” said El Salvador's central bank in its statement.

The bank noted that the US remained the chief country of origin for family remittances, sending US$2.17bn in January-May, up 4.2% y-o-y. Other countries of origin were: Canada US$20.6mn, Italy US$9.9mn, Spain US$9.1mn, and Panama with US$3.5mn.

CenAm, Mexico trends

Remittance growth to other Central American nations and Mexico continues to be stronger than in El Salvador.

Remittances data for January-April indicate 12.4% y-o-y growth in Guatemala to US$4.05bn; 9.3% growth in Honduras to US$2.14bn, while Nicaragua recorded US$518mn in remittances from January to April, showing 7.5% annual growth.

Meanwhile, Mexico saw remittances grow 5.8% to US$10.5bn in the first four months compared to January-April last year.