Ghanaian expatriates send money to Ghana on a monthly basis to support family and the economy as well. After reaching a new high of $554 billion in 2019, remittances to LMICs are expected to plummet in 2020. Despite the drop, money transfers are projected to grow in importance in the context of external funding for LMICs. The drop in foreign direct investment is projected to be even greater (more than 35 percent). Remittances to LMICs surpassed FDI in 2019, marking a significant landmark in tracking capital flows to developing countries.
Remittances to LMICs are expected to rebound in 2021, rising by 5.6 percent to $470 billion, according to the World Bank. The outlook for remittances is as unpredictable as the effect of COVID-19 on global growth and disease control initiatives. Remittances have traditionally been counter-cyclical, with employees sending more money home during periods of recession and deprivation. However, this time the pandemic has spread to all nations, adding to the uncertainty. Analysts are hopeful of increasing the money transfer to Ghana as well.
What Is GDP? And How Remittance Effect GDP Of A Country?
The total monetary or market value of all final goods and services within a country’s borders in a given time span is known as Gross Domestic Product (GDP). Since it is a significant indication of total domestic growth, it provides an intricate scoring system of a country’s economic health.
Both commercial and public consumption, government outlays, expenditures, additions to private inventories, paid-in construction costs, offline & online money transfer to Ghana from expatriates, and the international balance of trade are factored into a country’s GDP estimate. (The value of exports is applied to the value of imports, and the importance of implications is subtracted.)
The inward remittance, i.e. expatriates, send money to Ghana online or offline; are a vital source of funding for some of the world’s poorest people, and their worth far outweighs ODA. According to the Migration Policy Institute, remittances contributed more than 10percent of the entire GDP in 24 countries and more than 20percent in 9 countries. Remittances have been shown in many studies to have a positive impact on poverty reduction in recipient countries. Remittances, unlike development assistance, go directly to the people and families who need them, and their effect is immediate.
Remittances have many beneficial positive impacts in reducing poverty and promoting economic growth by increasing disposable income and consumption and increasing government tax revenues. An optimistic multiplier effect exists, which could be greater than that in other types of finance.