Remittances expected to plunge by about 20 percent 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, World Bank says.

"Remittances are a vital source of income for developing countries," World Bank Group President David Malpass said. (AFP Archive)

Remittances sent home by migrants from low- and middle-income countries are expected to drop around 20 percent this year amid the global economic slowdown caused by the novel coronavirus. the World Bank said Wednesday.

Job losses and lost hours and wages are expected to leave migrants in wealthier nations unable to send as much money home to poorer countries already suffering from coronavirus shutdowns, the report says.

The flow of remittances to poorer countries in Europe and Central Asia is expected to drop 27.5 percent, followed by sub-Saharan Africa with 23.1 percent, South Asia at 22.1 percent, the Middle East and North Africa at 19.6 percent, Latin America and the Caribbean with 19.3 percent and East Asia and the Pacific with 13 percent.

The drop is already dealing a heavy blow to families and entire economies in the developing world. From South Asia to Latin America, relatives of workers who send money from wealthier countries are already reporting difficulty meeting basic daily needs after cuts in remittances.

Remittances last year became a larger source of funds for poorer nations than foreign direct investment, Remittances reached a record $554 billion in 2019, a number that may have been ever larger due to the flow of remittances through informal channels like cash carried by hand. Foreign direct investment to developing countries is expected to drop 35 percent this year, the World Bank said.

In the largely indigenous Guatemalan town of Joyabaj, half of the 100,000 residents depend on remittances, almost all from the US.

Rosa Lopez, 18, left a money-transfer office this month holding her 2-year-old son and $100 sent by her sister, who works at a dairy in Texas. The dairy has cut working hours in half, forcing the sister to cut back the money she sends.

The money that came last week will allow Lopez and seven other relatives to buy rice, beans and other basics, but they may have to stop paying the light and water bills, she said.

“We need to figure out a way not to die of hunger,” Lopez said. “She’s the only one who’s helping the entire family.”

The World Bank recommended that governments and businesses work to protect immigrants from the economic and health effects of the coronavirus, saying migrants laborers were often excluded from programs meant to cushion the effects of the pandemia. 

And it encouraged states and companies to lower the costs of sending money home, which can be as high as 20 percent in the most expensive region for remittances, Southern Africa.

Source: AP