The World Bank reported this week that despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected.
According to the financial institution, officially recorded remittance flows to low- and middle-income countries reached US$540 billion in 2020, just 1.6 per cent below the 2019 total of US$548 billion, according to the latest Migration and Development Brief.
Comparatively, it outlined, the decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis (4.8 per cent). 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 over 30 per cent in 2020.
In fact, the World Bank stated, remittance flows to low- and middle-income countries surpassed the sum of FDI (US$259 billion) and overseas development assistance (US$179 billion) in 2020.
The report noted that 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 World Bank, however, says it believes that the true size of remittances, which include formal and informal flows, is believed to be larger than officially reported data, though the extent of the impact of COVID-19 on informal flows is unclear.
“As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
“Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.”
Remittance inflows rose in Latin America and the Caribbean (6.5 per cent), South Asia (5.2 per cent) and the Middle East and North Africa (2.3 per cent). On the other hand, remittance flows fell for East Asia and the Pacific (7.9 per cent), for Europe and Central Asia (9.7 per cent), and for Sub-Saharan Africa (12.5 per cent).
The decline in inflows to Sub-Saharan Africa was almost entirely due to a 28 per cent decline in remittance flows to Nigeria. Excluding flows to Nigeria, remittances to Sub-Saharan Africa increased by 2.3 per cent, demonstrating resilience.
The World Bank has been monitoring migration and remittance flows for nearly two decades and said it 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 affects remittance flows.