As the COVID-19 pandemic and economic crisis continues to spread, the amount of money migrant workers send home is projected to decline 14 percent 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 percent, to $508 billion in 2020, followed by a further decline of 7.5 percent, to $470 billion in 2021. 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 World Bank will continue working with partners and countries to keep the remittance lifeline flowing, and to help sustain human capital development.”
The declines in 2020 and 2021 will affect all regions, with the steepest drop expected in Europe and Central Asia (by 16 percent and 8 percent, respectively), followed by East Asia and the Pacific (11 percent and 4 percent), the Middle East and North Africa (8 percent and 8 percent), Sub-Saharan Africa (9 percent and 6 percent), South Asia (4 percent and 11 percent), and Latin America and the Caribbean (0.2 percent and 8 percent).
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 $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.
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 percent by 2030. The cost was the lowest in South Asia (5 percent) and highest in Sub-Saharan Africa (8.5 percent). Banks are the costliest channel for sending remittances, averaging 10.9 percent, followed by post offices at 8.6 percent, money transfer operators at 5.8 percent, and mobile operators at 2.8 percent.