WASHINGTON, DC: Developing countries are losing a key source of revenue as the coronavirus pandemic causes worldwide shutdowns, sharply reducing payments from workers living abroad, the World Bank said Wednesday (Apr 22).
Remittances are expected to plunge by about 20 per cent globally this year, the biggest decline in recent history, as closures cause a global recession and job losses that prevent workers from sending money to their families back home, the World Bank said in a report.
"Remittances are a vital source of income for developing countries," World Bank Group President David Malpass said in a statement.
"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."
Total remittances are expected to fall to US$445 billion from US$554 billion in 2019, the report said.
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Even with the decline, these payments are expected to become an even more important source of income in low- and middle-income countries "as the fall in foreign direct investment is expected to be larger (more than 35 per cent)," the World Bank report said.
Dilip Ratha, lead economist for the report, said the payments act as a "lifeline" and a way of "sharing prosperity" with the families who receive them.
"That sort of decline is actually unprecedented in the recorded history," Ratha told reporters, adding that migration also might decline due to the crisis.
In some countries, payments from workers abroad amount to a quarter or even one-third of GDP, including South Sudan, Haiti, Nepal, Kyrgyz Republic, Tajikistan, Montenegro and Tonga.
Remittance flows are expected to fall most notably in Europe and Central Asia (27.5 per cent), followed by sub-Saharan Africa (23.1 per cent), South Asia (22.1 per cent), the Middle East and North Africa (19.6 per cent), Latin America and the Caribbean (19.3 per cent), and East Asia and the Pacific (13 per cent).
The efforts to contain the spread of COVID-19 are expected to cause a severe global downturn, and there is a substantial risk of continued economic recession well into 2021, the report said.
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