Remittances to El Salvador hit record in 2018

Family remittances to El Salvador had another record-breaking year, reaching US$5.47bn in 2018.

Last year's remittances growth rate was 8.4%, according to central bank (BCR) data.

The previous record was set in 2017 when money transfers to the Central American nation surpassed US$5bn for the first time.

The result also beat the central bank's initial remittances projection of US$5.2bn.

Of the 162 source nations for money transfers to El Salvador, the US contributed the lion's share with US$5.10bn, followed by Canada with US$48.8mn and Italy with US$23.4mn.

Remittances received from the US grew 8.5% y-o-y, while those originating in Canada, Italy, Spain and Mexico increased 9%, 12.1%, 24.3% and 16.9%, respectively.

One-fifth of economy

Last year's record growth also gave greater weight to remittances as a contributor to overall GDP in El Salvador.

The current official estimate for 2018 GDP stands at US$25.84bn, and if this proves correct, remittances would have represented 21.2% of the economy.

Remittances, for example, exceeded the income generated by international tourism. Preliminary data from the tourism ministry (Mitur), released last week, indicate that the arrival of international visitors generated less than a third of what family remittances contributed in the year. International tourists generated US$1.47bn in 2018, according to Mitur.

Remittances, furthermore, were on the verge of surpassing the total value of exported goods in the first 11 months of 2018, which stood at US$5.49bn - only US$18mn more than remittances.

Compared to FDI, last year's remittances represented more than half of what foreign investors injected into the country. The BCR data indicate that in the first three quarters of 2018, FDI amounted to US$9.79bn.

The BCR added that full-year 2018 remittances to Guatemala amounted to US$9.29bn (+13.4%) and to Honduras US$4.88bn (+10%). Meanwhile, January-November 2018 remittances to Mexico were up 10.9% y-o-y and were 7.8% higher for Nicaragua in the same period.

Trends in play

BCR data indicates that the average amounts sent per transfer are on the rise, with 19.9mn remittance transactions recorded last year at a growth rate of 4.2% - lower than the growth rate for total funds transferred in the period.

The bank noted that the US unemployment rate in December sat at 3.9% with a creation of 312,000 jobs compared to the previous month. The Hispanic unemployment rate for the month was somewhat higher at 4.4%. However, both rates were lower than those of the same month of the previous year, which the bank believes bodes well for even higher remittances in 2019.

In its report "Migration and Remittances, Recent Development and Outlook" published in December 2018, the World Bank estimated that Latin American and the Caribbean received US$87bn in remittances last year, up 9.3% from 2017 levels.

Looking ahead, the World Bank, sees remittances to the LAC rising to US$90bn in 2019 and US$93bn in 2020.