Expect the Sharpest Decline in Global Remittances in Recent History, Says World Bank

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A recent press release by the World Bank says that global remittances are projected to decline sharply by about 20 percent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown.

Sub-Saharan Africa will be among the hardest hit regions.

The projected fall, which would be the sharpest decline in recent history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country.

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With the major contributors of outward remittances globally, including Africa, in recession and on lockdown, the lower and middle-income countries are expected to be hit hardest by this remittance slowdown.

Remittance flows to low and middle-income countries other than China are larger than foreign direct investment. In 2019, remittances reached a record $554 billion.

In Africa, the North and Sub-Saharan Africa are expected to feel the most pinch due to their high dependence level on remittances.

Remittance flows are expected to fall as shown below:

  • Europe and Central Asia – 27.5%
  • Sub-Saharan Africa – 23.1%
  • South Asia – 22.1%
  • The Middle East and North Africa – 19.6%
  • Latin America and the Caribbean – 19.3%
  • East Asia and the Pacific – 13%

The report notes that large economies such as the European Union, the United States, the Middle East, and China are among the worst hit by the coronavirus outbreak. These key destinations host a large share of Sub-Saharan African migrants and combined, are a source of close to a quarter of total remittances sent to the region.

In the past, remittances have been counter-cyclical, where workers send more money home in times of crisis and hardship back home. This time, however, the pandemic has affected all countries, creating additional uncertainties.

According to World Bank Group President, David Malpass:

Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies.

Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs.”

The global average cost of sending $200 remains high at 6.8 percent in the first quarter of 2020, only slightly below the previous year. Sub-Saharan Africa continued to have the highest average cost, at about 9 percent, yet intra-regional migrants in Sub-Saharan Africa comprise over two-thirds of all international migration from the region.

As a result, the World Bank 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.

The World Bank is thus advocating for quick and efficient ways to send and receive remittances into Africa and treating remittance services as essential.

 

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