The Covid-19 pandemic has set several macroeconomic indicators on a downward spiral, with remittance flows expected to be severely impacted. However, remittance flows remained resilient in 2020, only declined $8 billion less in 2019.
According to World Bank statistics, remittance flows declined only minimally, registering $540 billion in 2020. Thus, reflecting a 1.6% below the 2019 total of $548 billion. These figures pertain to the official recorded remittance flows to low- and middle-income countries.
Compared with remittance flows recorded during the 2008/2009 Financial Crisis, the decline in recorded remittance flows in 2020 was only marginal. Furthermore, it recorded far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries.
Quite interestingly, the remittance flows to low- and middle-income countries exceeded foreign direct investment (FDI) and overseas development assistance (ODA) combined, both contributing as low as $358 billion in 2020.
Meanwhile, the contributing factors to the generally steady flow of remittances included the widely accommodative fiscal policies implemented across economies. Especially, the fiscal stimulus packages that resulted in robust economic conditions in implementing countries.
Likewise, a shift in flow from cash to digital, and from informal to formal channels, volatilities in oil prices and currency exchange rates contributed to the flow of remittances .
The true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data, though uncertainties exist with the true extent of the impact of COVID-19 on informal flows.
“As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
“Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.”
Regional differences and outlook of remittance flows
Although remittance flows fared pretty well, the performance varies widely on a regional level. Remittance inflows increased in Latin America and Carribean by 6.5 percent, 5.2 percent in South Asia and 2.3 percent in the Middle East and North Africa.
Meanwhile, remittance inflows fell for East Asia and the Pacific, reflecting a fall of 7.9 percent. For Europe and Central Asia, the decline registered was 9.7 percent, and for sub-Saharan Africa, 12.5 percent.
The fall in remittance inflows in sub-Saharan Africa stems from a 28% decline in inflows to Nigeria. With Nigeria excluded, the remittances to sub-Saharan Africa increased by 2.3%.
“The resilience of remittance flows is remarkable. Remittances are helping to meet families’ increased need for livelihood support,” said Dilip Ratha, lead author of the report on migration and remittances and head of KNOMAD.
“They can no longer be treated as small change. The World Bank has been monitoring migration and remittance flows for nearly two decades, and we are working with governments and partners to produce timely data and make remittance flows even more productive.”Dilip Ratha, Head of KNOMAD.
That said, the outlook of remittance flows is positive. Remittance flows to low- and middle-income countries will increase by 2.6 percent to $553 billion in 2021. This trajectory will continue in 2022 increasing by 2.2 percent to $565 billion in 2022, the Word Bank predicts.
However, the outlook for remittances still faces a host of uncertainties. This is due to the continuous rise in infections within a number of large developing economies.
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