Remittances projected to shrink 14 per cent by 2021
Remittances to Sub-Saharan Africa are projected to shrink by 9 per cent in 2020, and by 6 per cent in 2021.
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 new 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 $508 billion in 2020, followed by a further decline of 7.5 per cent, to $470 billion in 2021. According to the report, international migration is set to fall in 2020 for the first time in recent decades.
The foremost factors driving the decline in remittances include weak economic growth and employment levels in the host countries of the migrants, weak oil prices, and depreciation of the currencies of remittance-source countries against the US dollar – all related to the negative economic impacts of the COVID-19 pandemic.
The declines in 2020 and 2021 will affect all regions, with remittances projected to shrink in Sub-Saharan Africa by 9 per cent and 6 per cent, respectively.
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.
“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.”
According to the World Bank, 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.
In its Remittance Prices Worldwide Database, the World Bank says 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 percent 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,” the World Bank said in a statement. “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.”
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