The World Bank estimates that Global remittances are projected to decline sharply by about 20 per cent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown. The projected fall, which would be the sharpest decline in recent history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country. Remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 per cent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
Studies show that remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labour in disadvantaged households. A fall in remittances affects families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
Remittance flows are expected to fall across all World Bank Group regions, most notably in Europe and Central Asia (27.5 per cent), followed by Sub-Saharan Africa (23.1 per cent), South Asia (22.1 per cent), the Middle East and North Africa (19.6 per cent), Latin America and the Caribbean (19.3 per cent), and East Asia and the Pacific (13 per cent).
The global average cost of sending $200 remains high at 6.8 percent in the first quarter of 2020, only slightly below the previous year. Sub-Saharan Africa continued to have the highest average cost, at about 9 percent, yet intra-regional migrants in Sub-Saharan Africa comprise over two-thirds of all international migration from the region.
Regional Remittance Trends
Remittances to Sub-Saharan Africa registered a small decline of 0.5 per cent to $48 billion in 2019. Due to the COVID-19 crisis, remittance flows to the region are expected to decline by 23.1 per cent to reach $37 billion in 2020, while a recovery of 4 per cent is expected in 2021. The anticipated decline can be attributed to a combination of factors driven by the coronavirus outbreak in key destinations where African migrants reside including in the EU area, the United States, the Middle East, and China. These large economies host a large share of Sub-Saharan African migrants and combined, are a source of close to a quarter of total remittances sent to the region.
In addition to the pandemic’s impact, many countries in the Eastern Africa region are experiencing a severe outbreak of desert locusts attacking crops and threatening the food supply for people in the region. Remittance costs: Sending $200 remittances to the region cost 8.9 per cent on average in the first quarter of 2020, a modest decrease compared with the average cost of 9.25 per cent a year before. The most expensive corridors are observed mainly in the Southern African region, with costs as high as 20 per cent. At the other end of the spectrum, the less expensive corridors had average costs of less than 3.6 per cent.
