Despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected, says the World Bank report on migration and remittances.
Officially recorded remittance flows to low- and middle-income countries reached $540 billion in 2020, just 1.6 percent below the 2019 total of $548 billion, according to the latest Migration and Development Brief.
The decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis (4.8 percent). It was also far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries, which fell by over 30 percent in 2020. As a result, remittance flows to low- and middle-income countries surpassed the sum of FDI ($259 billion) and overseas development assistance ($179 billion) in 2020.
The main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates. The true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data, though the extent of the impact of COVID-19 on informal flows is unclear.
According to the report, remittance inflows rose in Latin America and the Caribbean (6.5 percent), South Asia (5.2 percent) and the Middle East and North Africa (2.3 percent). However, remittance flows fell for East Asia and the Pacific (7.9 percent), for Europe and Central Asia (ECA) region (9.7 percent), and for Sub-Saharan Africa (12.5 percent).
The World Bank experts note that the resilience of remittance flows is remarkable and they are helping to meet families’ increased need for livelihood support. According to them, remittances can no longer be treated as small change.
With global growth expected to rebound further in 2021 and 2022, remittance flows to low- and middle-income countries are expected to increase by 2.6 percent to $553 billion in 2021 and by 2.2 percent to $565 billion in 2022.
According to the report, remittances to Europe and Central Asia fell by about 9.7 percent to $56 billion in 2020 as the global pandemic and weak oil prices had a significant impact on migrant workers across the region. The economic crisis of 2020 was not unprecedented compared to the past crises of 2009 and 2015, which saw remittances to the region fall by 11 and 15 percent, respectively. Nearly all the countries in the region experienced declines in remittances in 2020. The depreciation of the Russian ruble significantly lowered the US dollar value of remittance flows to the region. For 2021, remittance flows are estimated to fall further by 3.2 percent as the region’s economies are expected to recover from the crisis slowly.
The World Bank, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries respond to the health, social and economic impacts of COVID-19. This includes $12 billion to help low- and middle-income countries purchase and distribute COVID-19 vaccines, tests, and treatments, and strengthen vaccination systems. The financing builds on the broader World Bank Group COVID-19 response, which is helping more than 100 countries strengthen health systems, support the poorest households, and create supportive conditions to maintain livelihoods and jobs for those hit hardest.
