Suppose you want to send money to Gambia online. In that case, you may be concerned about the percentage of Gambian GDP which relies on international money transfer. The global remittances projected a decline sharply by around 20% in 2020 because of the economic crises due to the COVID-19 pandemic.
The projected fall, which would be the sharpest decline in recent history, is mainly due to the fall in the wages and the employment of migrant workers. These workers are the ones that tend to be a lot more vulnerable to loss of jobs and wages in an economic crisis in the host country.
Studies have shown that remittances alleviate poverty in lower and middle-income countries, improve the nutritional outcomes linked to higher spending over education, and reduce child labour. The fall in the remittances affects the family’s ability to spend over the areas as more finances will be directed now to solve the food shortages.
The World Bank is now assisting the member states in monitoring the flow of all the remittances using many channels, the convenience, and the costs of sending money. It also includes the regulations to prospect the financial integrity, which affects the remittance flows.
Remittance flows are also expected to fall in all World Bank Group regions, most notably present in Europe and Central Asia, followed by Sub Saharan Africa.
In 2021, the World Bank estimates that remittances to the LMICs will recover and rise by 5.6% to $470 billion. In the past, remittances have now been countercyclical, where workers send money to Gambia online in times of crisis and hardships back home.
This time, however, the pandemic has now affected all of the countries, creating additional uncertainties. Effective social protection systems are essential to safeguard the poor and vulnerable in this crisis in developing countries and advanced countries. In the host countries, social protection interventions must also support the migrant populations.
Regional Remittance Trends
Remittance flows to East Asia and the Pacific region grew by 2.6% to $147 billion in 2019, around 4.3% points lower than the growth rate during 2018. In 2020, remittance flows were also expected to decline by 13%. The slowdown is driven by the declining inflows from the YS, the largest source of remittances into the region.
Remittances to Europe and Central Asia countries remained very strong in 2019, growing by 6% to $65 billion in 2019. Ukraine remained the biggest recipient of the remittances in this region, getting a record high of almost $16 billion in 2019.
Nevertheless, Balance of Payments data show the rapid increase of the formal remittances starting in March 2020. In the second and third quarters of 2020, remittances grew by 89.3% yearly compared to 18.5% for the same period in 2019.
Lowering the costs of the remittances may increase formal transfers, household welfare, and macroeconomic stability. The thought of a transfer channel is based on reliability, cost, speed, and ease of use. If the fees have been lower, the migrants may have sued the formal channels more frequently to replace the collapsed informal channels.
Currently, The Gambia is far from the Sustainable Development Goal of reducing the remittance to Gambia Cost to 3% by 2030. The onset of COVID-19 and the subsequent shift in the transfer channels for the remittances have shown that the technology exists and the demand for money is very vivid.