The World Bank has projected that money sent as payments and gifts back to Latin America and Caribbean is going to significantly decrease in 2020.
In a release the institution expressed that remittance flows are expected to fall across all World Bank Group regions. It noted that remittances to Latin America and the Caribbean are forecasted to fall by 19.3 per cent.
According to the Bank, remittances flows into Latin America and the Caribbean grew 7.4 per cent to US $96 billion in 2019. However, it explained that growth in inflows was uneven across countries in the region.
In estimating the costs of remittance, the bank highlighted that the average cost of sending US $200 to the region was 5.97 per cent (or US$11.94) in the first quarter of 2020.
The World Bank estimated that as the COVID-19 crisis rages on, the costs of transferring remittances to the region could increase due to operational challenges being faced by remittance service providers (closures of agents and offices, access to cash, foreign exchange, security) and compliance with AML/CFT (Anti-Money Laundering/Counter Financing of Terrorism) regulation.
Global remittances, the World Bank said, are also projected to decline sharply by about 20 per cent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown.
It explained that the projected fall would be the sharpest decline in recent history and it is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country.
President of the World Bank Group, David Malpass said: “Remittances are a vital source of income for developing countries.”
He said that the ongoing economic recession caused by COVID-19 is taking a severe toll on the ability of workers to send money home. In light of this, Malpass noted that shortening the time to recovery for advanced economies is vital.
Malpass remarked: “Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs.”
The World Bank reported that remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 per cent to US $445 billion, which represents a loss of a crucial financing lifelines for many vulnerable households.
According to the Bank, studies indicate that remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labour in disadvantaged households.
It said: “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.”
In 2021, the World Bank estimated that remittances to LMICs would recover and rise by 5.6 per cent to US $470 billion.
However, it noted that the outlook for remittance flows remain 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.