Remittances as a source of external financing: Global and regional trends

Abstract

Remittances are an important source of external financing for developing countries. Migration movements of the population from less developed to developed countries, in addition to a strong migration base, created the conditions for rising global remittance inflows. When it comes to developing countries, the above is particularly important, given that remittances represent a relatively stable source of inflow of foreign currency funds that partly improves the external imbalances in these countries. Also, these funds are of non-refundable nature, which means they do not increase the external indebtedness. The Western Balkan countries are the largest recipients of remittances among the developing countries in Europe. In addition, the share of remittances inflows in GDP is much higher in the Western Balkan countries compared to the EU member countries. The subject of research in this study is based on identifying the role of remittances as a source of external financing in developing countries. According to the subject of research, the aim is to establish the importance of remittances compared to other sources of external financing (foreign direct investment and official development assistance), with a special focus on the Western Balkan countries.