World Bank sees more gradual decline in remittances due to virus

The amount of money that migrants send home this year will drop less than previously forecast, while continuing to fall in 2021 as the Covid-19 pandemic leads to a more gradual and prolonged decline, the World Bank said.

Remittances to low- and middle-income countries will fall 7.2% in 2020 to $508 billion, the bank estimated in a report on Thursday, compared with an April forecast for a 19.7% decline. That’s more in line with the 5% drop during the 2009 financial crisis. However, the Washington-based institution now sees a further 7.5% decrease in next year, compared with a prior estimate for a 5.6% rebound.

Europe and Central Asia will take the biggest hit in 2020, with remittances expected to drop 16%. Latin America’s transfers are projected to fall 0.2%.

The smaller-than-expected hit to remittances in 2020 likely is explained in part by a shift from informal remittances carried by hand and via travel to formal remittances sent digitally, the World Bank said. Some migrants also were able to access cash transfers in the countries where they were working.

The two-year decline in global remittances will be driven by weak economic growth and a lack of jobs in migrant-hosting countries, low oil prices, and weak exchange rates in some remittance-sourced countries, which lowers remittances in dollar terms.