Dependents in the Caribbean are going to have to gird their loins for tougher times ahead, a circumstance that they can justifiably blame on the impact of the COVID-19 pandemic on remittance flows to the region, according to an end of October World Bank assessment of how the phenomenon has affected the amounts of money likely to be sent home by mostly US-based migrant workers next year.
The Bank’s October 29 Migration and Development Brief projects a decline of 14 percent in remittances next year compared with remittances in 2020, with the Caribbean, already likely to have to deal with heavy job losses, having to absorb its fair share of that decline.
The Brief indicates that remittance flows to low and middle-income countries could decline by 7 percent, to $508 billion in 2020, which is likely to decline by a further 7.5 percent, to US$470 billion next year. The factors driving the decline most strongly, the World Bank says, are weak economic growth and employment levels in migrant-hosting countries, primarily the United States and depreciation of the currencies of remittance-source countries against the US dollar.
World Bank Vice President for Human Development and Chairman of its Migration Steering Group Mamta Murthi is quoted as saying that the impact of COVID-19 has been pervasive “when viewed through a migration lens as it affects migrants and their families who rely on remittances.” He said that the World Bank will continue working with partners and countries to keep the remittance lifeline flowing, and to help sustain human capital development.
The decline in remittances to the Caribbean this year and next year is expected to be around 8 percent, that amount will resonate heavily in a region where the impact of COVID-19 on the tourism industry is expected to create job losses numbering in the thousands on the mostly lower rungs of the sector’s employment ladder, and creating an increasing level of dependence on remittances from outside the region.
Some of the steepest drops in remittances over the aforementioned period are expected to occur in Europe and Central Asia (by 16 percent and 8 percent, respectively), followed by East Asia and the Pacific (11 percent and 4 percent), the Middle East and North Africa (8 percent and 8 percent), Sub-Saharan Africa (9 percent and 6 percent), South Asia (4 percent and 11 percent), and Latin America (0.2 percent).
The extent of the dependency of lower and middle income countries on remittances is reflected in the fact that that the US$548 billion remitted to those countries in 2019 was larger than the $534 billion in foreign direct investment (FDI) received by those countries. The gap between remittance flows and FDI is expected to widen further as FDI is expected to decline more sharply.
The Bank notes that the problem is likely to be exacerbated by the fact that this year, for the first time in recent history, the stock of international migrants is likely to decline on account of a slowing of new migration and an increase in return migration, the latter reportedly resulting from the lifting of national lockdowns which had 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, the Bank says.
Meanwhile, the Bank contends that “beyond humanitarian considerations, there is a strong case to support migrants who work with host communities on the frontline in hospitals, labs, farms, and factories.” It also calls for the governments of “origin countries” to be more pro-active in finding ways of supporting returning migrants in resettling, finding jobs or opening businesses since surges in return migration are likely to prove burdensome for the communities to which migrants return as they must provide quarantine facilities in the immediate term and support housing, jobs, and reintegration efforts in the medium term.
Remittance flows, the World Bank says, could also be further affected by increasing hurdles faced by banks involved in remittance transactions but which are becoming increasingly mindful of becoming enmeshed in controversies arising out of non-compliance with anti-money laundering (AML) and combating terrorism financing (CFT) standards.
Remittance flows into Latin America and the Caribbean are expected to be about $96 billion in 2020, a decline of 0.2 percent over the previous year. Remittances to Colombia, El Salvador, and the Dominican Republic registered positive year-on-year growth between the months of June and September after falling sharply in April and May. Flows to the region’s top recipient, Mexico, held up in part because migrants were employed in essential services in the United States and eligible migrants also benefitted from U.S. stimulus programmes. Remittance costs: The average cost of sending $200 to the region rose slightly to 5.8 percent in the third quarter. In many smaller remittance corridors, costs continue to be high. For example, the cost of sending money to Haiti and the Dominican Republic exceeds 8 percent.
