Impact of COVID-19 on Remittances

Global remittance is a multi-billion dollar market, used by millions of people to send money around the world. In 2019, the estimated total remittance around the globe was more than $700 Billion led by money transfer companies and banks.

Remittances play a crucial role for people around the globe, as migrant workers highly depend on these international money transfers. Remittance systems were considered to be a constant and reliable source of income for households. However, Due to the COVID-19 pandemic outbreak, various industries are affected particularly in the field of remittance. As per the World Bank’s report on remittance, remittances are projected to decline by about 20% in the year 2020, the sharpest decline in recent history because of the economic crisis and shutdown.

Weightage of remittances to the Economy

Remittances have estimated to contribute billions to the global economy. Remittances have provided countries a major increase in remittance inflow because of migrant workers. Migrant workers are a big part of Singapore’s economy. 20 percent of Singapore’s population are overseas nationals. A huge percentage of the overseas workers are involved in labor, construction sectors, hospital needs and domestic helpers. For most migrant workers, their host country is the hope to gain a sustainable income and they send most of their income back to their families. Unfortunately, the pandemic left migrant workers unemployed and it seems like the situation will take some time before the services of these workers are needed again.

Countries which depend on remittance inflows for their economy will suffer a more severe economic recession. In developing countries, remittances take up a significant segment of their gross domestic product (GDP). Hence, less cash flows inwards the country and depleting government budgets magnifies the current crisis.

The crisis driven by COVID-19 will have significant repercussions throughout the globe, particularly the countries depending on remittances. Through the means of lowering remittance fees in collaboration with banks and money transfer service companies, this will ensure that migrants can send more money abroad. In addition to lowering costs, policymakers in remittance-sending countries should lessen stringent identification requirements demanded of migrants, incentivize the use of digital platforms, and protect migrants from job losses. On the other hand, policymakers in the countries receiving remittance to ensure availability of remittances service centers. In such times of difficulties, it is important to maximize our current resources. With the rise of technology, the potential of the digital revolution should be augmented around the globe to make remitting easier and more convenient.