Global Remittances Shock
COVID-19 Global Impact
April 27, 2020 – People migrate across the globe for many reasons including to avoid wars and conflict or political persecution. However, a large majority of migrants leave their home country for economic reasons as they try to avoid extreme poverty. The benefits of migration are at least three fold: the person who migrated benefits from being in a better economic situation, the country they migrated to benefits from their productivity and the country they migrated from benefits as a significant amount of migrants send money back to their home country in the form of remittances.
According to the United Nations, roughly one billion people in the world — or one in seven — are involved with remittances, by either sending or receiving them. About 800 million people in the world — or one in nine — are recipients of these flows of money sent by their family members who have migrated for employment purposes.
Importantly, remittances help lift and keep millions of people out of poverty, with funds at times representing 60% of household incomes. Moreover, remittances are saved or invested in asset building or activities that generate income and jobs and transform economies, particularly for developing nations and in rural areas.
The dual COVID-19 and brief oil price war shocks are now expected to plunge the world into a global recession, disrupting billions of dollars of remittances flows. Our latest GDP projections may reduce remittances for 72 economies by $34.1 to $39.1 billion. In a worst-case scenario, where monetary and fiscal policies fail, remittances for these same economies might fall by nearly $100 billion.
Authors: Dana M Peterson,Estaban Tamayo,