World Bank President David Malpass (World Bank Photo)
The economic shutdown caused by the Covid-19 pandemic would likely result in the sharp decline of global remittances this year by about 20 percent, the World Bank said.
In a statement, the World Bank said the projected fall, which would be the sharpest decline in recent history, would be due to a decline in the wages and employment of migrant workers.
Remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 percent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households, the World Bank said.
“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.
“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.
The World Bank said it was working with G20 countries and others to reduce remittance costs and improve financial inclusion of the poor.
World Bank expects remittance flows to fall across regions — 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 the Caribbean by 19.3 percent; and East Asia and the Pacific by 13 percent.
The large decline in remittances in 2020 will come after flows to LMICs reached a record $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, at more than 35 percent, the World Bank said.
In 2019, remittances to LMICs were bigger than foreign direct investments.
The statement noted that in previous years, remittances were counter-cyclical — workers sent more money home in times of crisis. Today, however, the pandemic has affected all countries, thereby creating more uncertainties.
The World Bank said social protection mechanisms were needed to help families of overseas workers.
“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.
In 2019, personal remittances to the Philippines reached $33.5 billion, equivalent to 9.3 percent of gross domestic product. (Melo M. Acuña)