Posted: Thursday, October 29, 2020. 1:52 pm CST.
By Aaron Humes: A World Bank survey has found that migrant workers will be sending less money back home to their families in the coming months, even as it costs them more to do so. In fact, some of them may be coming back home as well.
Estimates in the Migration and Development Brief project a decline of 14 percent worldwide in remittance flows by 2021 compared to pre-COVID-19 levels in 2019. Figures for low and middle-income countries will tumble seven percent in 2020 to US$508 billion, then by 7.5 percent in 2021 to $470 billion, from an all-time high of US$548 billion in 2019. Factors in the reduction include weak economic growth and employment levels in migrant-hosting countries, weak oil prices; and depreciation of the currencies of remittance-source countries against the US dollar.
The 2019 figure outpaced foreign direct investment flows ($534 billion) and overseas development assistance (about $166 billion). The gap between remittance flows and FDI is expected to widen further as FDI is expected to decline more sharply.
Latin America and the Caribbean will be least affected, with reductions of 0.2 percent this year (US$96 billion) and 8 percent in 2021. Countries seeing year-on-year growth include Colombia, El Salvador and the Dominican Republic, particularly from June to September. Top recipient Mexico is steady as employment of migrants in essential services in the United States held up as well their receiving U.S. stimulus programs. However, the cost of sending US$200 to the region rose slightly to 5.8 percent in the third quarter (July to September), with costs as high as 8 percent in Haiti and the Dominican Republic.
Also, this year, for the first time in recent history, the stock of international migrants is likely to decline as new migration has slowed and return migration has increased. Return migration has been reported in all parts of the world following the lifting of national lockdowns which left many migrant workers stranded in host countries. Rising unemployment in the face of tighter visa restrictions on migrants and refugees is likely to result in a further increase in return migration.
According to the World Bank’s Remittance Prices Worldwide Database, the global average cost of sending $200 was 6.8 percent in the third quarter of 2020, largely unchanged since the first quarter of 2019. This is more than double the Sustainable Development Goal target of 3 percent by 2030. Banks are the costliest channel for sending remittances, averaging 10.9 percent, followed by post offices at 8.6 percent, money transfer operators at 5.8 percent, and mobile operators at 2.8 percent, though the latter face increasing restrictions related to anti-money laundering (AML) and combating terrorism financing (CFT) standards.
The Bank pledges US$160 billion over a 15-month period ending June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans and $12 billion for developing countries to finance the purchase and distribution of COVID-19 vaccines.
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