Remittance flows to low- and middle-income countries reached $540 billion in 2020, 1.6 per cent less than the 2019 total, and are set to rise as the global economy recovers, the World Bank said.
Despite the impact of Covd-19, the decline in remittance flows in 2020 was smaller than the 4.8 per cent drop recorded during the 2009 global financial crisis, the Washington-based lender said in its migration and development brief.
“As Covid-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” Michal Rutkowski, global director of the social protection and jobs global practice at the World Bank, said.
“Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.”
In October, the lender estimated remittances would fall 14 per cent by the end of this year compared with pre-Covid-19 levels in 2019. It projected global remittances would decline 7 per cent to $508bn in 2020 and 7.5 per cent to $470bn in 2021.
The pandemic and lockdown measures tipped the world economy into its worst recession since the 1930s. However, the rapid vaccine rollout and substantial fiscal stimulus and monetary support from governments and central banks led the International Monetary Fund to raise its forecast in April for global economic growth to 6 per cent for this year, from an earlier 5.5 per cent estimate.
With the global economy expected to recover further in 2021 and 2022, remittance flows to low- and middle-income countries are expected to increase 2.6 per cent to $553bn this year and 2.2 per cent to $565bn in 2022, according to the World Bank.
The main drivers for the steady flow of global remittances 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 resilience of remittance flows is remarkable. Remittances are helping to meet families’ increased need for livelihood support,” Dilip Ratha, lead author of the report on migration and remittances and head of the Global Knowledge Partnership on Migration and Development, said. “They can no longer be treated as small change.”
The global decline in remittances in 2020 was also far lower than the fall in foreign direct investment flows to low- and middle-income countries, which, excluding flows to China, fell by more than 30 per cent last year, the World Bank said.
Remittance flows to low- and middle-income countries surpassed the sum of FDI ($259bn) and overseas development assistance ($179bn) in 2020, according to the report.
The bank said remittance inflows rose 6.5 per cent in Latin America and the Caribbean, 5.2 per cent in South Asia and 2.3 per cent in the Middle East and North Africa. However, remittance flows fell 7.9 per cent for East Asia and the Pacific, 9.7 per cent for Europe and Central Asia, and 12.5 per cent for Sub-Saharan Africa.
The increase in remittance volumes to the Mena region to about $56bn in 2020 was largely because of strong remittance flows to Egypt and Morocco, the World Bank said.
Remittance inflows to Egypt increased 11 per cent to a record of about $30bn in 2020, while flows to Morocco rose 6.5 per cent and Tunisia increased 2.5 per cent.
In contrast, other regional economies such as Djibouti, Lebanon, Iraq and Jordan posted double-digit declines in remittance inflows last year, the report said.
Remittances to the Mena region are likely to grow 2.6 per cent in 2021 due to moderate growth in the euro area and weak outflows from GCC countries.
The World Bank has been working with G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.
The global average cost of sending $200 remained high at 6.5 per cent in the fourth quarter of 2020, the World Bank said. This is more than double the Sustainable Development Goal target of 3 per cent.
Average remittance costs were the lowest in South Asia at 4.9 per cent, while Sub-Saharan Africa continued to have the highest average cost at 8.2 per cent, the report added.