On the Importance of Money Transfers

How important is the American money transfer industry for the rest of the world? Let’s answer this question by finding out what countries receive most in money transfers from the USA. In our investigation we will use data provided by www.pewsocialtrends.org. Here is a list of 10 countries that received most in money transfers from the US in 2012.

At the first sight, there is little surprising about this list. Each of these countries has a large diaspora living and working in the US, so it would be reasonable to expect their citizens to send money back home in large volumes and on a regular basis. However, seeing Guatemala, El Salvador and the Dominican Republic in the top-ten made me think beyond simple estimate of number of immigrants and consider those countries in terms of their GDP, or total economic output.

My reasoning was simple. While China and Guatemala may be comparable in terms of the number of their citizens living and working in the USA, they are on completely different levels in terms of their respective Gross Domestic Product which will be huge for China and modest for Guatemala. This means that the amount of money sent by the Guatemalans to their homeland will reflect a much larger proportion of Guatemala’s GDP compared to China’s. But how much larger? Let’s find out.

US Money Remittance as a Percentage of GDP (Top 10 Receivers)

As you see, if we arrange the former table by the percentage of US money remittance relative to GDP China drops to the bottom with less than two tenths of a percent, while El Salvador soars to the top with almost 15%. Given that in 2012 El Salvador’s GDP grew by one tenth of that number, or by 1.5%, the absence of money remittance from the US would likely lead to a double-digit decrease of El Salvador’s GDP. Sure enough, if all Salvadorian immigrants moved back to their homeland and worked there they would still contribute to the country’s economy, but it would hardly be enough to reduce the gap even by half.

Of course, El Salvador is not the only country whose economy relies on money remittance from the US. Guatemala, the second one on the list, would also experience a substantial reduction in economic output if the US stopped sending money to it, though it would likely be less than 5% (as the country’s GDP increased by 3.1% 2012). As for the Dominican Republic, money coming from US remittance (4.64%) roughly equal the 4.5% increase of its GDP (2012), so even though the Dominican economy benefits from its American diaspora it would be sustainable even without transfers from the US.

Curious to find out if there are other countries similar to El Salvador in their dependence on money remittance from the US, I obtained a list of the countries Omnex Group transfers money to and made a similar table. These were my findings:

US Money Remittance as a Percentage of GDP (OMNEX Group Countries)

It turns out that Honduras is another country whose economy relies on money remittance from the US: with GDP growing by 3.3% (2012) Honduras remains almost as dependent on its citizens working abroad as El Salvador. Jamaica is another example: its GDP grew by only 2.3% (2012), leaving it between Guatemala on the one side and El Salvador and Honduras on the other in terms of growth independence.

Conclusions

With economies of entire countries depending on remittances from the US, it is hard to overestimate the importance of the American money transfer industry. Omnex Group, one of the industry leaders providing top-of-the-class service for over twenty years, is proud to be dedicated to ensuring economic sustainability and fighting poverty all over the world. As part of ongoing efforts to make money transfers more available and affordable, OMNEX Group has launched an online service Sharemoney that allows individuals sending money over the Internet. See if Sharemoney offers fast and reliable transfers to your home country and help its economy boom!