As the COVID-19 pandemic and economic crisis continues to spread, the amount of money migrant workers send home is projected to decline 14 per cent 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 per cent, to US $508 billion in 2020, followed by a further decline of 7.5 per cent, to US $470 billion in 2021, said the press release of the World Bank.
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 declines in 2020 and 2021 will affect all regions, with the steepest drop expected in Europe and Central Asia by 16 per cent and 8 per cent respectively followed by East Asia and the Pacific11 per cent and 4 per cent, the Middle East and North Africa 8 per cent each, Sub-Saharan Africa 9 per cent and 6 per cent, South Asia 4 per cent and 11 per cent, and Latin America and the Caribbean 0.2 per cent and 8 per cent, the release added.
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 US $548 billion in 2019, larger than foreign direct investment flows US $534 billion and overseas development assistance about US $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.
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.
According to the World Bank’s Remittance Prices Worldwide Database, the global average cost of sending $200 was 6.8 percent 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 per cent by 2030. The cost was the lowest in South Asia 5 per cent and highest in Sub-Saharan Africa 8.5 per cent.
Banks are the costliest channel for sending remittances, averaging 10.9 per cent, followed by post offices at 8.6 per cent, money transfer operators at 5.8 per cent, and mobile operators at 2.8 per cent.
Despite being the cheapest, money transfer and mobile operators face increasing hurdles as banks close their accounts to reduce 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 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 WB statement.
Regional Remittance Trends
Remittance flows to the East Asia and Pacific region are projected to fall by 11 per cent in 2020 to US $131 billion due to the adverse impact of COVID-19.
Remittances to countries in Europe and Central Asia are estimated to fall by 16 per cent to US $48 billion as the pandemic and fall in oil prices are likely to have wide-ranging impacts on economies, with nearly all countries in the region posting double-digit declines of remittances in 2020.
Remittance flows into Latin America and the Caribbean are expected to be about US $96 billion in 2020, a decline of 0.2 per cent over the previous year.
Remittances to the Middle East and North Africa region are projected to fall by 8 percent in 2020 to US $55 billion due to the projected persistence of the global slowdown.
Remittances to South Asia are projected to decline by around 4 per cent in 2020 to US $135 billion.
Remittances to Sub-Saharan Africa are expected to decline by around 9 per cent in 2020 to US $44 billion.
