World Bank predicts sharpest decline of remittances to Caribbean

WASHINGTON, CMC – The World Bank has predicted the sharpest decline of remittances to Latin America and the Caribbean, saying that global remittances on a whole are projected to fall by about 20 percent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown.

“The projected fall, which would be the sharpest decline in recent history, 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,” said the Washington-based financial institution in a statement on Wednesday.

It said remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 percent to US$445 billion, “representing a loss of a crucial financing lifeline for many vulnerable households.”

The World Bank pointed to studies that show 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.

“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,” the bank said.

“Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies,” said World Bank Group President David Malpass.​

The World Bank 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 affect remittance flows.

The bank said it is also working with the Group of 20 (G20) of the world’s industrialised countries and the global community to reduce remittance costs and improve financial inclusion for the poor.

“Even with the decline, remittance flows are expected to become even more important as a source of external financing for LMICs as the fall in foreign direct investment (FDI) is expected to be larger [more than 35 percent],” the bank said.

In 2019, it said remittance flows to LMICs became larger than FDI, an important milestone for monitoring resource flows to developing countries.

The World Bank estimates that in 2021 remittances to LMICs will recover and rise by 5.6 percent to US$470 billion.

Follow The Gleaner on Twitter and Instagram @JamaicaGleaner and on Facebook @GleanerJamaica. Send us a message on WhatsApp at 1-876-499-0169 or email us at onlinefeedback@gleanerjm.com or editors@gleanerjm.com.