'Developing economies see drop in funds from migrants'

Developing economies see drop in funds from migrants: World Bank

All regions are expected to see declines in remittance payments, the report said

Representative image. Credit: Pixabay Photo

Developing countries are suffering a drop a key source of revenue as the coronavirus pandemic causes worldwide shutdowns, reducing payments from workers living abroad, the World Bank said Thursday.

A new report estimates remittances to low- and middle-income countries are expected to fall this year by seven per cent to $508 billion.

They are expected to decline another 7.5 per cent in 2021 as employment and migration is slowed by the pandemic restrictions and economic slowdown, curtailing the funds workers can send home to their families.

Although the result is slightly better than April when flows in 2020 alone were projected to plunge by 20 per cent, the 14 per cent drop over two years it is still a big hit to a revenue source that the World Bank said outstripped foreign direct investment in 2019, when it hit a record $554 billion.

Immigrants are especially vulnerable to loss of wages since they tend to be concentrated in urban areas and work in service industries hardest hit by the economic shutdown, including food and hospitality, retail and wholesale, tourism and transport, and manufacturing.

"The impact of Covid-19 is pervasive when viewed through a migration lens as it affects migrants and their families who rely on remittances," said Mamta Murthi, the World Bank's vice president for human development.

He stressed the need for "countries to keep the remittance lifeline flowing."

The report noted that remittance flows recovered somewhat in June, rebounding from the sharp declines in April and May.

However, it appears "some migrants drew on their savings to send money home, but that cannot be sustained for long."

Some migrants also benefitted from government aid programs, but undocumented workers would not have access to those payments.

The steepest drop is expected in Europe and Central Asia (by 16 per cent and eight per cent, respectively), followed by East Asia and the Pacific (11 per cent and four per cent), the report said.

Sub-Saharan Africa will see declines of nine per cent and six per cent, while Latin America and the Caribbean fare better with a dip of 0.2 per cent this year and an eight per cent drop in 2021.

In some countries, payments from workers abroad amount to a quarter or even one-third of GDP, including Tonga, Haiti and Lebanon.