Remittances set for Sharpest Decline in Recent History

  • World Bank predicts a 20% fall in remittance volumes this year
  • This is down from record breaking highs of  $554 billion in 2019
  • Predictions for 2021 still see remittance volumes lower than 2017

In 2019 remittances to low and middle income countries reached a record breaking $554 billion. An increase on the $529 billion sent in 2018, and $483 billion in 2017. In fact last year marked the first time remittances from migrant workers provided a greater influx of cash to these economies than that by the foreign direct investment of multinational enterprises. 

World Bank forecasts a fall in remittances across all regions

The World Bank however has forecasted a 20% drop in remittances through 2020 with a total volume of $445 billion – marking the sharpest decline for remittance volumes in recent history. This will be largely driven by a fall in the wages and employment of migrant workers, who tend to be the most vulnerable to loss of employment and wages during an economic crisis in a host country. The fall thus represents a loss of a crucial financing lifeline for many vulnerable families.

Remittance flows are expected to fall across all World Bank Group regions:

Region Projected Fall
Europe and Central Asia 27.5%
Sub-Saharan Africa  23.1%
South Asia 22.1%
Middle East and North Africa 19.6%
Latin America and the Caribbean 19.3%
East Asia and the Pacific  13%

“Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies,” commented World Bank Group President David Malpass. “Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs.”

Fall predicted not only in remittance volumes

Even with the sharp decline in remittances, they are projected to become an even more important source of external funding for low and middle income countries as the drop in foreign direct investment is expected to be larger (over 35%). COVID-19 will have a profound impact on the income to these countries and the livelihood of those who are most vulnerable.

In 2021, the World Bank estimates that remittances will start to recover with a rise of 5.6% to $470 billion – although this is still below the annual volumes seen in 2017. The outlook for remittance volumes remains as uncertain as the impact of COVID-19 on the outlook for global growth and how effectively we can spread the slow of the disease. In the past, remittances have been counter-cyclical, where workers send more money home in times of crisis and hardship back home. This time, however, the pandemic has affected all countries, creating additional uncertainties.

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