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, the World Bank report says.
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 report notes that 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 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).
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 reportedly 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 report notes that 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.
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. To keep these channels open, especially for lower-income migrants, AML/CFT rules could be temporarily simplified for small remittances, according to the report. 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.
Remittances to countries in Europe and Central Asia are reportedly estimated to fall by 16 percent to $48 billion as the pandemic and fall in oil prices are likely to have wide-ranging impacts on economies, with nearly all countries in the region posting double-digit declines of remittances in 2020. The depreciation of the Russian ruble is also likely to weaken outward remittances from Russia.
Meanwhile, the volume of remittances from Russia to Tajikistan in the first half of this year has reportedly decreased by almost 40%.
According to data provided by the Central Bank of Russia, in January-June, individuals transferred US$681 million from Russia to Tajikistan, which is US$430 million less than in the same period last year.
In the first half of 2019, over US$1.111 billion were reportedly transferred from Russia to Tajikistan.
According to the Ministry of Labor of Tajikistan, the outflow of Tajik citizens to labor migration in the first half of this year has decreased by 57% due to the coronavirus pandemic,.
According to unconfirmed reports, more than 1 million citizens of nine million Tajikistan live and work in Russia.
