Strategy Note /
Global

Remittance drop in 2021 forecast by World Bank despite a better 2020 than feared

  • Remittance decline globally of 7% in both 2020 and 2021 according to latest World Bank forecast

  • Less sharp drop in 2020 (previously down 20%) but a longer lasting one through 2021 (previously up 5%)

  • Savings drawdown, shift to formal channels, host country cash handouts all moderated 2020 decline but are not recurring

Remittance drop in 2021 forecast by World Bank despite a better 2020 than feared
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Follow
Tellimer Research
2 November 2020
Published byTellimer Research

The surprising recovery in remittance data from June 2020 has acted as a boost for external financing of many small emerging and frontier countries. But this is not likely to last, according to latest World Bank forecasts and this compounds the risk from the decline in foreign direct investment (globally, remittances already outweighed FDI in 2019).

The surprising recovery in remittance data from June 2020 boosted external financing of many small emerging and frontier countries. But this is not likely to last, according to latest World Bank forecasts, and this compounds the risk from the decline in foreign direct investment (globally, remittances already outweighed FDI in 2019).

The drivers of this more moderate decline in 2020, according to the World Bank, are as follows:

  • Drawdown on savings by migrants;

  • Greater use of official channels for remittances;

  • Access to cash handouts in host countries;

  • In some cases, significant devaluation (eg Mexico), use of savings for the Hajj pilgrimage (eg Pakistan), and domestic disasters (Bangladesh floods).

None of these are regarded as acting as a recurring driver for remittance growth in 2021. Combined with the persistence of Covid-19 disruption and a pick-up in return to home country migration (in turn, due to unemployment, tighter regulation of immigration and asylum) this drives the forecast of another decline in 2021.

The table below compares, by region, the latest World Bank forecasts with previous ones from April, by region.

For charts showing those countries in our coverage most geared to aggregate remittances and those exposed particularly to the EU, GCC, US, and Russia, click on this link.