Written by Clara Chiu (Head of Partnership Development)
The COVID-19 pandemic rapidly spread worldwide in 2020, prompting various countries to implement measures such as school and work closures and different types of quarantine to control the outbreak. These actions had a significant impact on the global economy.
Global remittances have decreased, which reflects the impact of the pandemic.
When workers from a country go abroad to work and send back a portion of their earnings in the form of cash or goods to support their families back home, this transfer of money is referred to as worker or immigrant remittances.
The pandemic has caused significant unemployment and salary reductions, particularly in the hospitality, tourism, and construction industries, resulting in a decreased demand for overseas labour. Border closures have also made it difficult to export and import labour. Additionally, in various circumstances, financial institutions have temporarily suspended or only provided limited services due to the pandemic, making it difficult for immigrants to send money back to their home countries. The World Bank predicted a significant 20% decrease in global remittances.
Despite individual remittance amounts being relatively small, the total amount is three times that of official development aid worldwide. Remittances have helped meet the basic needs of many poor households in developing countries. Beyond helping individual families, remittances also stimulate the local economy and bring about change in the community. A decline in remittances could exacerbate poverty, limiting the opportunities for vulnerable groups to access healthcare, education, and other essential services.
Although the World Bank had predicted a significant drop in remittances due to the pandemic, their estimate turned out to be incorrect, as the ‘resilience’ of remittances proved to be very strong. According to a World Bank report in May 2021, global remittance inflows reached US$540 billion in 2020, which was only a 1.6% decrease from the total remittances in 2019. In 2021, remittance volumes increased further, with the amount sent to low- and middle-income countries reaching US$605 billion. Remittances connect migrant workers with their families back home and have become a social contract in financial terms. Despite the economic downturn, migrant workers have made every effort to save personal expenses and maintain remittances to their hometowns, resulting in a lower-than-expected decrease in remittances. The UN has designated 16 June as the International Day of Family Remittances to recognise the significant contribution of over 200 million migrants who send money to support their 800 million family members back home.
The issue of remittances is closely related to the population of overseas migrant workers. Taking Myanmar as an example, due to long-term political instability, the economic development in Myanmar has faced challenges, many people have sought better job opportunities in neighbouring countries with higher wages, particularly in Thailand where the government actively recruited migrant workers to boost the local service industry in the late 1980s. According to data from the United Nations Capital Development Fund (UNCDF), in 2019, about 3.7 million Myanmar people were living abroad, with Thailand, Bangladesh, and Malaysia being the top three destination countries.
According to the International Organization for Migration’s data in 2019, remittance inflows to Myanmar amounted to US$2.8 billion, accounting for 4% of the country’s gross domestic product.
Due to the importance of remittances, the UN’s Sustainable Development Goal 10 aims to reduce to less than 3% the transaction fees of migrant remittances and eliminate remittance corridors with costs exceeding 5% by 2030. This underscores the crucial role that foreign remittances play in the economic and sustainable development of poor countries and communities.
