Despite the impact of Covid-19 on the global economy, remittance flows remained resilient in 2020, registering a smaller decline than previously projected.
Officially recorded remittance flows to low- and middle-income countries reached $540-billion in 2020, 1.6% below the 2019 total of $548-billion, the World Bank's latest 'Migration and Development Brief' shows.
“Covid-19 still devastates families around the world and remittances continue to provide a critical lifeline for the poor and vulnerable. Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants,” says World Bank Social Protection and Jobs Global Practice director Michal Rutkowski.
The decline in recorded remittance flows in 2020 was smaller than the 4.8% decrease recorded during the 2009 global financial crisis. 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 more than 30% in 2020.
As a result, remittance flows to low- and middle-income countries surpassed the FDI sum of $259-billion and overseas development assistance of $179-billion in 2020.
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 relatively strong performance of remittance flows during the Covid-19 crisis has also highlighted the importance of the timely availability of data. Given its growing significance as a source of external financing for low- and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, timely reporting and granularity by corridor and channel,” the World Bank says.
Remittance inflows increased by 6.5% in Latin America and the Caribbean, 5.2% in South Asia and 2.3% in the Middle East and North Africa.
However, remittance flows decreased by 7.9% in East Asia and the Pacific, 9.7% in Europe and Central Asia and 12.5% in sub-Saharan Africa.
The decline in flows to sub-Saharan Africa was almost entirely owing to a 28% decline in remittance flows to Nigeria. Excluding flows to Nigeria, remittances to sub-Saharan Africa increased by 2.3%, demonstrating resilience.
“The resilience of remittance flows is remarkable. Remittances are helping to meet families’ increased need for livelihood support. They can no longer be treated as small change. The World Bank has been monitoring migration and remittance flows for nearly two decades and we are working with governments and partners to produce timely data and make remittance flows even more productive,” says lead author of the report on migration and remittances and migration knowledge and policy organisation Knomad head Dilip Ratha.
The World Bank is assisting member States in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows. It is working with the Group of 20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.
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% to $553-billion this year and by 2.2% to $565-billion in 2022. Even as many high-income nations have made significant progress in vaccinating their populations, infection rates are still high in several large developing economies and the outlook for remittances remains uncertain.
The global average cost of sending $200 remained high at 6.5% in the fourth quarter of 2020, more than double the Sustainable Development Goal target of 3%. Average remittance costs were the lowest in South Asia at 4.9%, while sub-Saharan Africa continued to have the highest average cost at 8.2%.
Supporting the remittance infrastructure and keeping remittances flowing includes efforts to lower fees.
Remittance growth was reported in Zambia at 37%, in Mozambique at 16%, in Kenya at 9% and in Ghana at 5%. In 2021, remittance flows to the sub-Saharan Africa region are projected to rise by 2.6%, supported by improving prospects for growth in high-income countries.