The amount of money migrant workers send back to their home countries is expected to decrease by almost $110bn this year as the Covid 19 pandemic increases unemployment across the world.
Remittances to low- and middle-income countries (LMICs) are projected to fall by nearly 20% to $445bn (£360bn), “representing the loss of a crucial financial lifeline for many vulnerable households”, the World Bank said.
Describing the decrease as the worst in recent history, including the 2008 financial crisis, the Washington-based development bank said migrant workers were especially vulnerable to losing their jobs during coronavirus lockdowns which are still largely in place across the developed world.
Remittances total aabout three times the amount of aid received by low-income countries and have become a cornerstone of living standards across the developing world.
Migrants typically send money to their families to boost living standards in some of the poorest parts of the world, including south Asia, sub-Saharan Africa and South America. Eastern Europe is expected to be one of the worst-hit regions as migrant workers in western Europe and Russia are forced to cut back the amounts they send back to families in Romania, Bulgaria, Ukraine and other former Soviet bloc countries.
The World Bank said studies showed that remittances alleviated poverty in lower- and middle-income countries, improved nutrition, were linked to higher spending on education, and reduced child labour in disadvantaged households.
“A fall in remittances affect families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs,” it said.
Countries that are large recipients of remittances, such as India, have also imposed lockdowns, causing widespread unemployment and hardship, often making the situation even worse for families that suffer a decline in money being sent home.
Oil-dependent countries, which have seen crude prices tumble from more than $60 a barrel in January to less than $20 a barrel this week, have also been hit by the economic impact of the pandemic, limiting the amount of help they can offer poor families.
Dilip Ratha, chief economist for migration and remittances at the World Bank, said migrants often worked in insecure jobs and were among the first to be let go in a crisis.
“But it is not just that they lose their jobs, the stores they use to send cash home have also shut down,” he said. “Migrants typically send small amounts of cash via stores and these have closed.”
Ratha said the developed world has come to depend on migrant workers for cheap and skilled labour, and should do more to alleviate their situation. They need access to healthcare for themselves and their families and cut-price banking facilities, which would allow them to send money home without paying high fees and commissions.
Last year, remittances reached an all-time high of $554bn. Next year, the World Bank expects a 5.6% recovery from the $445bn predicted this year to $470bn.
It said: “The outlook for remittance remains as uncertain as the impact of Covid-19 on the outlook for global growth and on the measures to restrain the spread of the disease.
“In the past, remittances have been countercyclical, where workers send more money home in times of crisis and hardship back home. This time, however, the pandemic has affected all countries, creating additional uncertainties,” it added.
Remittance flows are expected to fall across all regions, most notably in Europe and central Asia, where the fall in income is expected to be 27.5%, followed by sub-Saharan Africa, with a 23.1% decline. For east Asia and the Pacific, which includes Indonesia and the Philippines, the fall is put at 13% .
