The World Bank has warned that the value of remittances sent to the developing world from more advanced economies could drop by as much as $110 billion as a result of the Covid-19 pandemic.
Remittances are expected to decline by 20% to $445 billion.
After the Global Recession in 2009, global remittances declined by five percent; the coronavirus emergency is likely to see an even bigger decline, even after the global economy has begun to recover.
Remittances are a major source of funds for developing countries and last year overtook foreign direct investment as a source of capital inflows.
A report in The Economist pointed out that many advanced economies in Europe and North America are locked down, making it difficult for migrants to earn money or to send it. At the same time, many African countries have also locked down, making it difficult for people who receive remittances from abroad to access them. A further complication is that only about 20% of remittances are sent electronically or through a cellphone. Most remittances are still sent by the dropping off of cash through a third party. Lockdowns have made these methods more difficult.
A number of African countries are expected to be particularly hard hit. Remittances account for nearly a fifth of GDP in Lesotho and over ten percent in the Gambia. African countries with more advanced economies are also not immune, with remittances making up ten percent of Senegal’s GDP and six percent in Nigeria.
Nigeria, along with other African oil producers such as Angola, could be facing a double blow. The global oil price has collapsed as a result of the effective cessation of global economic activity, which will have serious implications for countries which rely on oil production for income. Oil accounts for nearly 90% of the Nigerian government’s revenue. Tough times lie ahead for many of the world’s poorer countries.