El Salvador shows slowing growth in remittances

Family remittances to El Salvador expanded 5.9% in the first quarter to US$1.30bn, an increase of US$72.5mn year-on-year, but the growth rate slowed when compared to the annual increase in 2018.

The nation's central bank recorded a total of 4.8mn transactions tied to family remittances in the quarter, not including cell phone top-ups, a 6.9% y-o-y increase.

Remittances to Mexico and Central America have shown heavy growth in recent years, with El Salvador's annual growth rate reaching 8.4% in 2018 and Mexico's growing 10.5% to a record high of US33.5bn.

That growth, tied to a strong US labor market and uncertainty surrounding US immigration policy, has shown signs of deceleration this year.

The central bank noted that in 1Q19, the total unemployment rate in the US in March was 3.8%, lower than the level in March 2018. Meanwhile, the Hispanic unemployment rate went from 5.1% in March 2018 to 4.7% in the same month of 2019.

"These variables indicate that the labor market continues to favor Hispanics, being a positive element for the evolution of remittances," said the central bank in a statement.

Other 1Q19 data from the sub-region's central banks indicated 9.2% y-o-y growth in Guatemala to US$2.21bn; a 10.7% increase in Honduras to US$1.19bn; and 6.4% growth in Mexico to US$4.80bn.

El Salvador's central bank reported that in the first quarter, the average family remittance was US$266, excluding top-ups and cash remittances, and US$225 including these items.

Remittances to El Salvador came from 126 countries. The share provided by the top five source countries were as follows: the US with 94.8% of the total; followed by Canada with 0.9%; Italy 0.5%; Spain 0.4%; and Mexico with 0.1%.

The remittances market in El Salvador comprises 23 agents, including mobile top-up payers from abroad. The banks paid out 40.3% of the Q1 money transfers (equivalent to US$523mn), while remittance companies paid 57.5% (US$746mn).

Meanwhile, out-of-pocket cash remittances reached US$22mn, which are handed over physically by relatives, friends, 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$6.7mn in the first quarter of 2019.