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Remittances continue to paint Bangladesh's economic resilience

  • Published at 03:02 pm October 31st, 2020

In Bangladesh, remittances are projected to grow at a rate of 8% to around $20 billion, which was estimated at $14 billion for 2020, a likely fall of about 22% in the World Bank’s projection made in April

The World Bank has projected Bangladesh’s inward remittances to grow about 8%, reaching almost $20 billion in 2020, holding eighth position in the world as a recipient.

However, the amount of money migrant workers send home across the globe was projected to decline by 14% by 2021 compared to the pre Covid-19 days as the pandemic and economic crisis has continued to spread.

The global lender made the projection in its latest report, “Covid-19 Crisis through a Migration Lens,” released on Friday.

“Three large recipients of remittances — Mexico ($39 billion in 2019), Pakistan ($22 billion), and Bangladesh ($18 billion) — stand out as exceptions to the general pattern. These countries escaped a decline in remittance inflows in the second quarter and seem to register increases in the third one,” reads the report. 

In Bangladesh, remittances are projected to grow at a rate of 8% to around $20 billion, which was estimated at $14 billion for 2020, a likely fall of about 22% in the World Bank’s projection made in April, the report added.

The country received remittances worth $18.21 billion in the fiscal year 2019-20.

In Bangladesh, the impact of the global economic slowdown has been somewhat countered by the diversion of remittances from informal to formal channels due to the difficulty of carrying money by hand under travel restrictions, said the global lender.

Bangladesh registered a large increase in remittance inflows in July after the floods that inundated a quarter of its landmass, it added. 

The government’s incentives to transfer remittances have also been helpful in this regard.

In the case of Mexico, a sharp rise in remittance flows observed in Q1 2020 may have been triggered by a 25% depreciation of the peso against the US dollar.

Money transfer and mobile operators face increasing hurdles as banks close their accounts to reduce risks of non-compliance with anti-money laundering (AML) and combating terrorism financing (CFT) standards, the World Bank observed.

To keep these channels open, especially for lower-income migrants, AML/CFT rules could be temporarily simplified for small remittances, it said.

Strengthening mobile money regulations and identity systems would improve transparency of transactions and facilitating digital remittances would require improving access to bank accounts for mobile remittance service providers as well as senders and recipients of remittances, it added.

According to the projections, India tops the remittance recipient’s chart with $76 million, while China is the second with $60 billion remittances and Mexico is the third recipient of remittances with $41 billion. Pakistan holds sixth position with $24 billion remittances.

Remittance in Asia   

Remittances to South Asia are projected to decline by around 4% in 2020 to $135 billion.

In Pakistan, remittances will grow at about 9%, totaling about $24 billion. In India, remittances are projected to fall by about 9% in 2020, to $76 billion.

Remittance flows to the East Asia and Pacific region are projected to fall by 11% in 2020 to $131 billion due to the adverse impact of Covid-19.

China and the Philippines are the region’s top recipients, while as a share of GDP, the top recipients are Tonga and Samoa.

Global remittance scenario

The amount of money migrant workers send home across the globe is projected to decline  by14% by 2021 compared to the pre Covid-19 situation as the pandemic and economic crisis continue to spread.

The declines in 2020 and 2021 will affect all regions, with the steepest drop expected in Europe and Central Asia by 16% and 8% respectively, followed by East Asia and the Pacific 11% and 4%, the Middle East and North Africa 8% and 8%, Sub-Saharan Africa 9% and 6%.South Asia by 4% and 11% and Latin America and the Caribbean 0.2$ and 8%.

Remittance flows to low and middle-income countries (LMICs) are projected to fall by 7%, to $508 billion in 2020, followed by a further decline of 7.5% to $470 billion in 2021.

The foremost factors driving the decline in remittances include weak economic growth and employment levels in migrant-hosting countries, weak oil prices and depreciation of the currencies of remittance-source countries against the US dollar.

“The impact of Covid-19 is pervasive when viewed through a migration lens as it affects migrants and their families who rely on remittances,” said Mamta Murthi, Vice President for Human Development and Chair of the Migration Steering Group of the World Bank.

“The World Bank will continue working with partners and countries to keep the remittance lifeline flowing, and to help sustain human capital development.”

Stock of migrants to fall in 2020

This year, for the first time in recent history, the stock of international migrants is likely to decline as new migration has slowed and return migration has increased, said the WB.

 Initially, the lockdowns and travel bans left many migrant workers stranded in their host countries, unable to travel back.

Return migration has been reported in all parts of the world following the lifting of national lockdowns, which left many migrant workers stranded in host countries, it added.

It also forecast that rising unemployment in the face of tighter visa restrictions on migrants and refugees was likely to result in a further increase in return migration.

Countries of origin must find ways of supporting returning migrants in resettling, finding jobs or opening businesses, it suggested. 

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