Communities, societies and families that are dependent on foreign remittances should brace for a drop in their source of livelihoods as global remittances are expected to experience the sharpest decline in recent history.
This is according to the World Bank Group partly basing on projections of 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.
Remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 per cent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
This is an issue of concern as remittances are important in alleviating poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education. A fall in remittances affect families’ ability to spend on key areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
Experts say that the decline in remittances calls for increased social protection efforts especially to safeguard vulnerable members of societies.
Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank said that social protection systems should be deployed both in the beneficiary countries as countries hosting immigrants. In host countries, social protection he noted should also support migrant populations.
The large decline in remittances in 2020 comes after remittances to lower- and middle-income countries, reached a record $554 billion in 2019.
In 2021, the World Bank estimates that remittances will recover and rise by 5.6 per cent to $470 billion.
The outlook for remittance however remains as uncertain as the impact of COVID-19 on the outlook for global growth.
Remittances to Sub-Saharan Africa which registered a small decline of 0.5 percent to $48 billion in 2019 will decline by 23.1 per cent to reach $37 billion in 2020, while a recovery of 4 percent is expected in 2021.
The anticipated decline can be attributed to a combination of factors driven by the coronavirus outbreak in key destinations where African migrants reside including in the EU area, the United States, the Middle East, and China.
These large economies host a large share of Sub-Saharan African migrants and combined, are a source of close to a quarter of total remittances sent to the region.
In addition to the pandemic’s impact, many countries in the Eastern Africa region are experiencing a severe outbreak of desert locusts attacking crops and threatening the food supply for people in the region.