Transfers broke the record in 2021

Quito – Remittances sent by Ecuadorean immigrants continue to be a driving force for the country and The second item of foreign exchange income after exports. In 2021 they broke a record by reaching $4,362.4 million USD, an increase of 30.7% over the previous year.

According to the Central Bank of Ecuador, this is due to the economic revitalization of the countries in which citizens reside. (USA, Italy and Spain)as well as support measures from the governments of these countries.

4.1% of the national GDP

Remittances, which are the main secondary income of the country, Recorded year-on-year growth of $1,024.6 million compared to 2020. Moreover, a report by the European Central Bank notes that “the primary income deficit and the services balance deficit were offset by secondary income, due to the significant recovery in remittances received during 2021.”

The positive development of this variable occurred especially in the second quarter of 2021, with values ​​in excess of USD 1,000 million each quarter. in this way, The flow of incoming remittances in 2021, year after year, set a historical record, representing 4.1% of the estimated value of the 2021 GDP.

Since 2000, immigrant remittances have been the second source of foreign exchange earnings and play an important role in the economy, since then Stimulating consumption and encouraging investment.

The participation of countries in the remittance flow in 2021 showed that The United States accounts for 63.5%, Spain 20.8%, Italy 4.4%, and the rest of the world 11.3%.

What is the importance of foreign exchange?

According to various studies, the foreign currency that immigrants from abroad send to their countries of origin Act as a special financing mechanism for the most vulnerable groups By increasing their income level and enabling families to face crises. It is also a counter-cyclical tool For families to cope with external shocks that can affect their well-being.

That’s an explanation Why was household consumption the driver of the economy in 2021. This item rose 10.2% and contributed 6.3% to the disparity of national GDP, which grew by 4.2% last year. In household consumption, remittances received are specifically calculated, In addition to consumer loans and imports of consumer goods.

Asobanca explains that in the context of dollarization like the Ecuadorean, the income of these currencies Increases consumption and liquidity Thus it affects the performance of the GDP as shown.

Sent remittances and potential issues

With regard to remittances sent from Ecuador, this flow amounted to 595.1 million US dollars, an increase of 17.20% compared to 2020. These flows were mainly sent to:

Colombia: 60.63%

Mexico: 12.61%

Peru: 10.37%

These three countries together amount to 497.54 million US dollars, which is 83.61% of the total remittances abroad.

However, the conflict will negatively affect the global growth outlook, Including remittances, according to preliminary IMF analysis. The effect will come in three ways: higher prices for commodities such as food and energy, which will increase pressure on inflation; Economies close to feuding countries will have to contend with supply chain problems and trade disruptions, Low Remittance Streams And more refugees