Coronavirus threatens global remittances
Illustration: Aïda Amer/Axios
The coronavirus pandemic could cause remittance payments around the world to drop by 20%, the sharpest decline in history — threatening the livelihoods of the families who rely on them, the World Bank projects.
Why it matters: Families across the globe are depending on remittances more than ever as the coronavirus crisis batters local economies. Without them, millions will struggle to pay for basic needs, such as housing, health care and education.
Zoom in: Mexico was the third-largest recipient of remittances in 2018 and the largest recipient of money from the U.S., the New York Times writes.
- Remittances account for just 3% of Mexico's GDP, but they are an "enormous boon to some of the country's poorest communities," the Washington Post writes.
- In the state of Michoacán, remittances make up more than 11% of the local economy.
- Nearly 1.65 million households across Mexico receive money from abroad, per the Post.
- Mexican President Andrés Manuel López Obrador in April urged Mexicans abroad to continue to send remittance payments.
- Zoom out: In the most remittance-dependent countries, like Nepal or Haiti, they account for roughly one-third of GDP.
The big picture: The United Nations says remittance payments are actually three times more important than international aid since the money goes directly into the hands of people who need it most.
The state of play: Remittances in 2019 totaled $554 billion, and the World Bank expects the number to drop to $445 billion in 2020.
- Remittances as a share of a country’s GDP tend to be the largest in poor countries, small-island developing nations and those experiencing armed conflict.
- And even in countries with a strong GDP, remittance payments can act as a lifeline for some of its poorer or more rural communities.
What they’re saying: The World Bank recommends countries develop long- and short-term plans to support families that rely on the payment by increasing access to health care, housing and education.
- Governments should aid families who rely on remittances with cash payments to cover daily expenses as well as develop more secure ways to transfer remittance payments, the World Bank says.
The bottom line: Historically, remittance payments have dropped in a handful of countries at a time. “This time, however, the pandemic has affected all countries, and the economic fallout is likely to vary,” the World Bank writes.