India, the largest receiver of foreign remittances, will also be affected
The survival of at least 800 million households — dependent on remittances — in low- and middle-income countries was at stake due to the economic crisis perpetuated by the novel coronavirus disease (COVID-19) pandemic, according to World Bank projections released on April 22, 2020.
Global remittances were projected to dip sharply by about 20 per cent in 2020 after parts of the world were forced to go into lockdowns, said the World Bank.
India, the country that received the most remittances in the world — $79 billion in 2018, according to the World Bank’s Migration and Development Brief released in 2019 — will also be affected. The United States (US) was the second-largest source of remittances to India. Its economy, however, was also affected by COVID-19, with an impact expected for India.
Intensive social distancing and lockdowns — said to be the most important measures for containing the spread of the virus (SARS-CoV-2) — were responsible for the global economic downfall, said the World Bank.
The International Monetary Fund projected the global economy to contract by 3 per cent in 2020.
Migrant workers were the most vulnerable to the economic crisis in any country and may be the most affected, especially in low- and middle-income countries dependent on global migrants. This may be the sharpest decline witnessed in recent history due to a fall in wages and employment of migrant workers.
Approximately 800 million households in low- and middle-income countries received over 77 per cent of $715 billion sent by the global migrant workforce to their own countries, according to estimates by the World Economic Forum.
Around $551 billion was sent to dependent households living in these countries, with approximately $139 billion sent by migrants to their families in South Asia. This amount will decrease to $445 billion — a 19.7 per cent drop — representing a loss of a crucial financing lifeline for many vulnerable households, said World Bank projections.
Remittances take care of food, healthcare and the basic needs of households. They contribute to poverty alleviation by improving nutritional outcomes, said the World Bank.
Remittances were also associated with higher spending on education and reducing child labour in poor and vulnerable households. The decline in this form of income will affect the spending ability of households as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
The previous financial crisis affected remittances as well. Remittance flows between 2008 and 2009 declined by 5.5 per cent globally, said the Migration Policy Institute.
Migrant workers within Africa send remittances in excess of $14 billion each year. This will also likely suffer an adverse impact as the sub-Saharan African region was said to enter its first recession in 25 years.
It was vital for advanced economies to shorten their recovery time, said World Bank Group President David Malpass. The World Bank was working to keep remittance channels open and safeguard the poorest communities’ access to these basic needs, he said.
“The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home,” Malpass added.
The World Bank said it was assisting member-states in monitoring the flow of remittances through various channels, the costs and convenience of sending money and regulations to protect the financial integrity that affected them. It was working with G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor, the World Bank report said.
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