Global remittances to fall due to economic crisis triggered by COVID-19
World Bank says global remittances to decline by about 20 percent due to the economic crisis triggered by COVID-19
MANILA – The COVID-19 pandemic which caused the economic crisis and shutdown will like result in the sharp decline of global remittances this year by about 20 percent.
In a statement released by the World Bank at 8:00 P.M. Thursday datelined Washington said the projected fall which is believed to be the sharpest decline in recent history, is basically due to a fall in the wages and employment of migrant workers, believed more vulnerable to loos of employment and wages every economic crisis in a host country. Remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 percent to US$445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
Previous and present studies show remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labor in underprivileged households. A fall in remittances will impact on families ability to spend on these areas as more of their finances will be put on food requirements and other livelihood needs.
“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,” said World Bank Group President David Malpass. He added remittances help families buy food, afford healthcare and basic needs.
“As the World Bank Group implements fast, broad action to support countries, we are working to keep remittances channels open and safeguard the poorest communities’ access to these most basic needs,” he added.
They are assisting member states in monitoring the flow of remittances through different channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows. According to the statement, they are working with the G20 countries and the global community to reduce remittance costs and improv financial inclusion of the poor.
World Bank expects remittance flows to fall across regions, particularly in Europe and Central Asia by 27.5 percent, Sub-Saharan Africa by 23.1 percent, South Asia by 22,1 percent, the Middle East and North Africa by 19.6 percent, Latin America and Caribbean by 19.3 percent and East Asia and the Pacific by 13 percent.
The large decline in remittances flows in 2020 comes after remittances to LMICs reached a record of US$554 billion in 2019. Even with the decline, remittance flows are expected to become even more important as a source of external financing for LMICs as the fall in foreign direct investment is expected to be larger (more than 35 percent). In 2019, remittances to LMICs were bigger than Foreign Direct Investments, an important basis for monitoring resource flows to developing countries.
However, the World Bank believes that remittances to LMICs will recover and rise by 5.6 percent to US$470 billion. The outlook for remittance remains as uncertain as the impact of COVID-19 on the outlook for global growth and on the appropriate programs to stop the spread of the disease.
The same statement revealed that in previous years, remittances have ben country-cyclical, where workers send more money home in times of crisis and hardship back home. Today, however, the pandemic has affected all countries thereby creating more uncertainties.
“Effective social protection systems are crucial to safeguarding the poor and vulnerable during this crisis in both developing countries as well as advanced countries. In host countries, social protection interventions should also support migrant populations,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
Remittance flows to East Asia and the Pacific region grew by 2.6 percent to US$147 billion in 2019, about 4.3 percentage points lower than the growth rate in 2018. In 2020, remittance flows are expected to decline by 13 percent. The slowdown is expected to be driven by declining inflows from the United States, the largest source of remittances to the region.
Remittance-dependent countries such as those in the Pacific Islands could see households at risk as remittance incomes decline over this period. A recovery of 7.5 percent growth for the region is projected in 2021.
The Bangko Sentral ng Pilipinas said personal foreign remittances in 2019 reached US$33.5 billion which was 9.3 percent of Gross Domestic Product (GDP) and 7.8% of Gross National Income (GNI).
The Department of Foreign Affairs said there were 1,122 Filipinos were found COVID-19 positive and from this number 653 are undergoing treatment, 307 recovered/discharged and 162 deaths. The COVID-19 figures were reported from 43 countries.
The DFA said as of February 2020, 19,048 Overseas Filipinos have been repatriated, a big bulk from this numbers are seafarers. (Melo M. Acuña)
World Bank President David Malpass. (World Bank Photo)