DESPITE the novel coronavirus pandemic, remittance flows remained resilient in 2020, registering a more marginal decline than previously projected, the World Bank reports.
According to the bank's latest Migration and Development Brief, officially recorded remittance flows to low- and middle-income countries reached US$540 billion in 2020, 1.6 per cent below the 2019 total of US$548 billion.
“The decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis (4.8 per cent). It was also far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries, which, excluding flows to China, fell by over 30 per cent in 2020. As a result, remittance flows to low- and middle-income countries surpassed the sum of FDI (US$259 billion) and overseas development assistance (US$179 billion) in 2020,” the report stated.
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 bank indicated.
Remittance flows to Latin America and the Caribbean grew an estimated 6.5 per cent to US$103 billion in 2020. While COVID-19 caused a sudden decrease in the volume of remittances in the second quarter of 2020, remittances rebounded during the third and fourth quarters.
“The improvement in the employment situation in the US, although not yet to pre-pandemic levels, supported the increase in remittance flows to countries such as Mexico, Guatemala, Dominican Republic, Colombia, El Salvador, Honduras and Jamaica, for whom the bulk of remittances originate from migrants working in the US. On the other hand, the weaker economic situation in Spain negatively affected remittance flows to Bolivia (-16 per cent), Paraguay (-12.4 per cent) and Peru (-11.7 per cent) in 2020,” the report indicated.
It added that in 2021 remittance flows to the region are expected to grow by 4.9 per cent.
The World Bank, however, noted that 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.
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 per cent to US$553 billion in 2021 and by 2.2 per cent to US$565 billion in 2022.
“As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” said Michal Rutkowski, global director for social protection and jobs at World Bank.
“Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.”