23/02/2021

For many developing countries, reduced remittances and less foreign-direct investment are a double whammy | D+C - Developme…

LABOUR MIGRATION

Preserving the lifeline of migrants’ remittances
26/01/2021 – by Dilip Ratha

Remittances are funds sent by migrant
workers home to their families. António
Guterres, the UN secretary general, has
called them “a lifeline in the developing
world”. This lifeline is under threat, as
employment of migrant workers falls and
fees for sending the funds remain steep.
The Covid-19 crisis has hit hard at a major source
of income in low- and middle-income countries
(LMICs): the remittances of citizens who work
abroad. This is causing economic upheavals
worldwide, especially in remittance-depending
economies like India, Mexico, the Philippines and
Egypt.
Worldwide, the amount of money that migrant
workers send home fell from an estimated $ 548
billion in pre-Covid 2019 to a forecast $ 508 billion
in 2020, and is projected to fall further to $ 470
billion in 2021. That is a 14 % drop in remittances
over the two-year period.
Making matters worse, foreign direct investment
(FDI) – another crucial support for remittancereceiving economies – is falling even faster in LMICs, according to gures in the World Bank’s “Migration
and Development Brief 33” of October 2020.
FDI into low- and middle-income countries declined from $ 534 billion in pre-Covid 2019 to an estimated
$ 365 billion in 2020, and is forecast to fall further to $ 373 billion in 2021, for a two-year drop of 30 %.
That is more than twice the percentage fall in remittances over the same period (see chart).
A notable aspect is that in 2019, for the rst time since 1992, the volume of remittances, which tend to
come from individual workers, was actually higher than the volume of FDI, which tends to come from
companies and other organisations. The fact that remittance in ows exceed FDI in ows shows just how
bad the economic situation is in many LMICs.
The steady fall in both remittances and FDI is a double-whammy in LMICs, on top of the domestic
economic impacts of the Covid-19 crisis itself. Some remittance-receiving countries also face concurrent
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