Remittance Flows Remain Strong During COVID-19 Crisis
WASHINGTON, D.C. – The World Bank Wednesday said despite the coronavirus (COVID-19) pandemic, remittance flows remained resilient in 2020, registering a smaller decline than previously projected.
Officially recorded remittance flows to low- and middle-income countries reached US$540 billion in 2020, just 1.6 per cent below the 2019 total of US$548 billion, according to the latest Migration and Development Brief.
Remittances flows to Latin America and the Caribbean grew an estimated 6.5 per cent to US$103 billion in 2020.
The World Bank said while COVID-19 caused a sudden decrease in the volume of remittances in the second quarter of 2020, remittances rebounded during the third and fourth quarters.
It said the improvement in the employment situation in the United States, although not yet to pre-pandemic levels, supported the increase in remittance flows to countries such as Mexico, Guatemala, Dominican Republic, Colombia, El Salvador, Honduras and Jamaica, for whom the bulk of remittances originate from migrants working in the United States.
On the other hand, the weaker economic situation in Spain negatively affected remittance flows to Bolivia (-16 percent), Paraguay (-12.4 percent) and Peru (-11.7 percent) in 2020.
In 2021, remittance flows to the region are expected to grow by 4.9 per cent. The cost of remittance transfers to the region was 5.6 per cent in the fourth quarter of 2020. In many smaller remittance corridors, however, costs continue to be exorbitant.
“As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
“Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants,” he added.
Remittance inflows rose in Latin America and the Caribbean (6.5 per cent), South Asia (5.2 per cent) and the Middle East and North Africa (2.3 percent).
However, remittance flows fell for East Asia and the Pacific (7.9 per cent), for Europe and Central Asia (9.7 per cent), and for Sub-Saharan Africa (12.5 per cent).
The World Bank said that the decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis (4.8 per cent).
“It was also far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries, which, excluding flows to China, fell by over 30 per cent in 2020. As a result, remittance flows to low- and middle-income countries surpassed the sum of FDI (US$259 billion) and overseas development assistance (US$179 billion) in 2020,” the Washington-based financial institution reported.
It said the main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates.
The true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data, though the extent of the impact of COVID-19 on informal flows is unclear.
The World Bank said that the relatively strong performance of remittance flows during the COVID-19 crisis has also highlighted the importance of timely availability of data.
“Given its growing significance as a source of external financing for low- and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, timely reporting, and granularity by corridor and channel,” it said.
The lead author of the report on migration and remittances and head of KNOMAD, Dilip Ratha, said the resilience of remittance flows is remarkable.
“Remittances are helping to meet families’ increased need for livelihood support,” Ratha said, adding “they can no longer be treated as small change. The World Bank has been monitoring migration and remittance flows for nearly two decades, and we are working with governments and partners to produce timely data and make remittance flows even more productive”.
The World Bank said it is assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows. It is working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.
With global growth expected to rebound further in 2021 and 2022, remittance flows to low- and middle- income countries are expected to increase by 2.6 per cent to US$553 billion in 2021 and by 2.2 per cent to US$565 billion in 2022.
Even as many high-income nations have made significant progress in vaccinating their populations, infections are still high in several large developing economies and the outlook for remittances remains uncertain,” the World Bank noted.
