Decline in Migrant and Expatriate Remittances to Home Countries in 2020

The World Bank issued a press release in Washington yesterday, Thursday 22 April 2020 — it set out its forecast of a sharp global decline in remittances of about 20 percent in 2020 due to the economic crisis caused by the COVID-19 pandemic and its containment. The expected decline, which would be the largest fall in recent history, is due largely to lower wages and employment of migrant workers, who tend to be more vulnerable to job and wage losses during an economic crisis in host countries of migrant workers and expatriates. Remittances to low- and middle-income countries are expected to fall by 19.7 percent to reach $445 billion in 2020.

The World Bank press release added that studies show remittances alleviate poverty in low- and middle-income countries, improve nutrition outcomes, are associated with higher spending on education, and reduce child labor in deprived households. The decline in remittances will affect households’ ability to spend on these areas as more of their financial resources will be directed to addressing food shortages and immediate livelihood needs...

David Malpass, President of the World Bank Group, said that the ongoing economic recession caused by COVID-19 is severely affecting the ability to send money home, making it necessary to shorten recovery time in advanced economies. "Remittances help households cover costs for food, health care, and basic needs. While the World Bank Group is implementing rapid, large-scale measures to support countries, we are working to keep remittance channels open and to protect the poorest communities’ access to these essential needs".

Remittance flows are expected to decline across all regions of the World Bank Group, especially in Europe and Central Asia (27.5 percent), followed by Sub-Saharan Africa (23.1 percent), South Asia (22.1 percent), the Middle East and North Africa (19.6 percent), Latin America and the Caribbean (19.3 percent), and East Asia and the Pacific (13 percent).

The large decline in remittance flows in 2020 follows remittances to low- and middle-income countries reaching a record $554 billion in 2019. Even with this decline, remittance flows are expected to become a more important source of external financing for low- and middle-income countries as foreign direct investment falls.

In 2021, the World Bank estimates that remittances to low- and middle-income countries will recover and rise by 5.6 percent to $470 billion. The outlook for remittances remains uncertain, as does the impact of COVID-19 on global growth forecasts and on measures to contain the disease.

In the past, remittances were countercyclical, with workers sending more money home in times of crisis and hardship in their home countries. But this time the pandemic has affected all countries and created greater uncertainty. Below we present statistics on remittances in the various remittance-receiving regions of the world in 2019; below we list the names of the top ten remittance-receiving countries in 2018.

India – $78.6 billion, China $67.4 billion, Mexico $35.7 billion, the Philippines $33.8 billion, Egypt $28.9 billion, Nigeria $24.3 billion, Pakistan $21 billion, Vietnam $15.9 billion, Bangladesh $15.5 billion, Ukraine $14.4 billion.

·      Remittances to East Asia and the Pacific

Remittance flows to East Asia and the Pacific grew by 2.6 percent to $147 billion in 2019, about 4.3 percentage points below the growth rate in 2018.

In 2020, remittance flows to the region are expected to decline by 13 percent. The slowdown is expected to be driven by lower inflows from the United States, the region’s largest source of remittances. Many remittance-dependent countries, such as those in the Pacific islands, could see vulnerable households suffer from lower remittance incomes during this period. A 7.5 percent recovery for the region is expected in 2021.

·      Remittances to Europe and Central Asia

Remittances to countries in Europe and Central Asia remained strong in 2019, growing by about 6 percent to $65 billion in 2019. Ukraine remained the largest recipient of remittances in the region, receiving a record amount approaching $16 billion in 2019. Economies in the region, such as the Kyrgyz Republic, Tajikistan, and Uzbekistan, particularly benefited from the recovery in economic activity in Russia.

In 2020, estimates indicate that remittances will fall by about 28 percent due to the combined impact of the global coronavirus pandemic and lower oil prices. Remittance costs: the average cost of sending $200 to the Economic Commission for Africa region fell modestly to 6.48 percent in the first quarter of 2020 from 6.67 percent in the previous year. Cost differences across corridors in the region are large; sending costs were highest from Turkey to Bulgaria, while they were lowest from Russia to Azerbaijan.

·      Remittances to Latin America and the Caribbean

Remittance flows to Latin America and the Caribbean grew by 7.4 percent to $96 billion in 2019. Growth in inflows was uneven across countries in the region. Brazil, Guatemala, and Honduras saw remittances increase by more than 12 percent in 2019. Colombia, Ecuador, Nicaragua, and Panama increased by more than 6 percent, while remittances to Bolivia and Paraguay fell by 3.8 percent and 2.2 percent, respectively. In 2020,

Estimates indicate that remittance flows to the region will fall by 19.3 percent. Remittance costs: the average cost of sending $200 to the region was 5.97 percent in the first quarter of 2020. Amid the COVID-19 crisis, the costs of sending remittances to the region may increase due to operational challenges faced by remittance service providers (agent and office closures, access to cash, foreign exchange, security) and compliance with anti–money laundering and counter-terrorism financing regulations.

·      Remittances to the Middle East and North Africa

Remittances to the Middle East and North Africa are expected to decline by 19.6 percent to $47 billion in 2020, after 2.6 percent growth in 2019. The expected decline is attributed to the global slowdown as well as the impact of lower oil prices on the GCC countries. Remittances from the euro area will also be affected by the region’s economic slowdown before COVID-19 and by the euro’s depreciation against the US dollar. In 2021, remittances to the region are expected to recover, albeit slowly at about 1.6 percent, due to the modest expected growth in the euro area and weak external flows from the GCC countries.

·      Remittances to South Asia

Remittances to South Asia are expected to fall by 22 percent to $109 billion in 2020, after 6.1 percent growth in 2019. The slowdown in remittance flows to South Asia in 2020 is due to the global economic slowdown caused by the coronavirus outbreak, as well as lower oil prices. The economic slowdown is likely to directly affect remittance outflows from the United States, the United Kingdom, and EU countries to South Asia. Lower oil prices will affect remittance outflows from the GCC countries and Malaysia.

·      Remittances to Sub-Saharan Africa

-        Remittances to Sub-Saharan Africa recorded a slight decline of 0.5 percent to $48 billion in 2019. Because of the COVID-19 crisis, remittance flows to the region are expected to fall by 23.1 percent to $37 billion in 2020, while a 4 percent recovery is expected in 2021. The anticipated decline can be attributed to a range of factors driven by the spread of the coronavirus in major destinations where African migrants reside, including the European Union, the United States, the Middle East, and China. These large economies together host a large share of migrants from Sub-Saharan Africa and are the source of nearly a quarter of total remittances sent to the region. In addition to the impact of the pandemic, many countries in the East Africa region are experiencing a severe desert locust outbreak that is attacking crops and threatening the food supplies of the region's population.

-        As an example of remittance sources for expatriates to a country like Lebanon, the sources of remittances to it come from the following sources: Europe 28.5% $2.268 billion, North America $2.157 billion at 27.3%, the Gulf countries $2.045 billion at 25%, Australia $954 million at 11.99%, Africa $84 million at 1%, Central and South America $205 million at 2.58%.

-        It is clear that remittances from expatriates to some Arab countries in the Gulf region, such as Jordan and Palestine, which are an important source of financing for the national economies of these countries, will be materially affected, which will in one way or another affect the incomes of the households receiving remittances in particular, and their spending levels, and the economies of the expatriates' homelands in general... adding to already deteriorating economic conditions due to the consequences of the coronavirus pandemic, in which the majority of sectors of these countries' national economies have been disrupted, producing realized losses primarily for the private sector and the public sector. In addition, there is the likelihood of termination of the services of many expatriate employees and workers in their places of residence, as a result of the austerity measures these countries are taking to confront the pandemic and to confront the collapse in oil prices that occurred with the crisis, which is still interacting in global markets, in addition to exchange rate volatility as a result and increasing the costs of remittances from expatriates to their homelands....