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World Bank: Covid-19 Remittance Flows to Shrink 14% by 2021

As the COVID-19 pandemic and economic crisis continues to spread, the amount of money migrant workers send home is projected to decline 14% by 2021 compared to the pre-COVID-19 levels in 2019, according to the latest estimates published in the World Bank’s Migration and Development Brief.

Remittance flows to low and middle-income countries (LMICs) are projected to fall by 7%, to $508 billion in 2020, followed by a further decline of 7.5%, to $470 billion in 2021. The foremost factors driving the decline in remittances include weak economic growth and employment levels in migrant-hosting countries, weak oil prices; and depreciation of the currencies of remittance-source countries against the US dollar.

“The impact of COVID-19 is pervasive when viewed through a migration lens as it affects migrants and their families who rely on remittances,” said Mamta Murthi, Vice President for Human Development and Chair of the Migration Steering Group of the World Bank. “The World Bank will continue working with partners and countries to keep the remittance lifeline flowing, and to help sustain human capital development.”

The declines in 2020 and 2021 will affect all regions, with the steepest drop expected in Europe and Central Asia (by 16% and 8%, respectively), followed by East Asia and the Pacific (11% and 4%), the Middle East and North Africa (8% and 8%), Sub-Saharan Africa (9% and 6%), South Asia (4% and 11%), and Latin America and the Caribbean (0.2% and 8%).

The importance of remittances as a source of external financing for LMICs is expected to amplify in 2020, even with the expected decline. Remittance flows to LMICs touched a record high of $548 billion in 2019, larger than foreign direct investment flows ($534 billion) and overseas development assistance (about $166 billion). The gap between remittance flows and FDI is expected to widen further as FDI is expected to decline more sharply.

“Migrants are suffering greater health risks and unemployment during this crisis,” said Dilip Ratha, lead author of the Brief and head of KNOMAD. “The underlying fundamentals driving remittances are weak and this is not the time to take our eyes off the downside risks to the remittance lifelines.”

Return Migration has Increased

This year, for the first time in recent history, the stock of international migrants is likely to decline as new migration has slowed and return migration has increased. Return migration has been reported in all parts of the world following the lifting of national lockdowns which left many migrant workers stranded in host countries. Rising unemployment in the face of tighter visa restrictions on migrants and refugees is likely to result in a further increase in return migration.

“Beyond humanitarian considerations, there is a strong case to support migrants who work with host communities on the frontline in hospitals, labs, farms, and factories,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank. “Supportive policy responses by host countries should include migrants, while origin or transit countries should consider measures to support migrants returning home.

Origin countries must find ways of supporting returning migrants in resettling, finding jobs or opening businesses. The surge in return migration is likely to prove burdensome for the communities (to which migrants return) as they must provide quarantine facilities in the immediate term and support housing, jobs, and reintegration efforts in the medium term.

According to the World Bank’s Remittance Prices Worldwide Database, the global average cost of sending $200 was 6.8% in the third quarter of 2020, largely unchanged since the first quarter of 2019. This is more than double the Sustainable Development Goal target of 3% by 2030. The cost was the lowest in South Asia (5%) and highest in Sub-Saharan Africa (8.5%). Banks are the costliest channel for sending remittances, averaging 10.9%, followed by post offices at 8.6%, money transfer operators at 5.8%, and mobile operators at 2.8%.

Despite being the cheapest, money transfer and mobile operators face increasing hurdles as banks close their accounts to reduce the risk of non-compliance with anti-money laundering (AML) and combating terrorism financing (CFT) standards. To keep these channels open, especially for lower-income migrants, AML/CFT rules could be temporarily simplified for small remittances. Further, strengthening mobile money regulations and identity systems will improve the transparency of transactions. Facilitating digital remittances would require improving access to bank accounts for mobile remittance service providers as well as senders and recipients of remittances.

The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. It is supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs. The WBG is making available up to $160 billion over a 15-month period ending June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans and $12 billion for developing countries to finance the purchase and distribution of COVID-19 vaccines.

Author

  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

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