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 https://www.dandc.eu/en/article/many-developing-countries-reduced-remittances-and-less-foreign-direct-investment-are-double 1/5

Select target paragraph3