Global remittances remained resilient in the months following the COVID-19 outbreak even amidst the amid job losses and declining wages, according to the Egypt based financial services company, EFG Hermes.
Global remittance here refers to the amount of money sent by a laborer who works in another country to his home country.
During the summer, Pakistan, Bangladesh and Sri Lanka saw record levels of remittances, while all major remittance sources showed strong growth, including the GCC, the US, the United Kingdom and, to a lesser extent, Europe, the investment bank said in a recent note.
“The numbers are inflated by the fact that some sizable flows, which previously went through unofficial channels, are now recognized in reported data as they are passing through official channels largely due to movement restrictions,” the EFG Hermes note said.
“Large transfers are also partially a reflection of expat workers coming back home for good, hence transferring large sums of money.”
This is in line with the results of a recent survey by the financial comparison site yallacompare, which found that despite economic challenges from the pandemic a majority of UAE residents continue to send money home on a regular basis. But this amount was less than the same period last year. The average monthly amount remitted this year by UAE expatriate residents ranges from $272.24 to $544.21, the survey found.
This year, the World Bank projected a 7 percent decrease in remittances to $508 billion, an improvement from the 19.7 percent slump it had predicted in April.
According to the EFG, remittances to Pakistan, Morocco, Sri Lanka, Bangladesh and Kenya rebounded strongly in the months following the record sharp drops from March to May, the period lockdowns were prevalent globally, growing on average by 27 percent year on year.
Strong remittance growth has coincided with weak job markets globally, the bank said. However, in the coming 12 to 18 months, it warned of a potential drop in inflows. This resonates with the World Bank’s findings, which suggest that, as opposed to its previous estimate of a 5.6 percent rebound, remittances would fall by a further 7.5 percent in 2021 to $470 billion.
The investment bank added that it continues to expect remittances to suffer as the normalization of labor markets to pre-COVID-19 levels are likely to take years. The potential decline in remittances next year would have the most negative effects on Egypt, Bangladesh and Sri Lanka. According to the EFG, the pain would be much more serious for Jordan and Lebanon.
“The degree of the expected drop remains hard to predict considering the uncertainties around the pandemic’s second wave and normalization of flows as restrictions are removed,” EFG said. “Any large drops in remittances, associated with thousands, if not millions, of workers going back to their home countries, would clearly raise a number of economic and social challenges to recipient countries.”
