## The Impact of COVID-19 on Remittance Flows ## Source details **Canonical URL:** [The Impact of COVID-19 on Remittance Flows](https://www.imf.org/en/publications/fandd/issues/2020/06/covid19-pandemic-impact-on-remittance-flows-sayeh) ## Other formats - [Markdown version](/en/publications/fandd/issues/2020/06/covid19-pandemic-impact-on-remittance-flows-sayeh/index.md) - [Structured JSON version](/en/publications/fandd/issues/2020/06/covid19-pandemic-impact-on-remittance-flows-sayeh/index.json) - [Bundle manifest](/en/publications/fandd/issues/2020/06/covid19-pandemic-impact-on-remittance-flows-sayeh/bundle-manifest.json) ## Bibliographic details - Authors: Antoinette Sayeh, RALPH CHAMI - Published: June 1, 2020 --- ### Overview: role and scale of remittances - Remittance flows to low-income and fragile states reached $350 billion as of 2018, surpassing foreign direct investment, portfolio investment, and foreign aid as the single most important source of income from abroad. - Remittances are private, countercyclical income transfers that insure families against income shocks by supporting and smoothing consumption. - A drop in remittances will heighten economic, fiscal, and social pressures on governments of low-income and fragile countries already struggling to cope. ### Transmission of shocks - Remittances sync the business cycles of recipient and sending countries; shocks to host-country economies transmit to remittance-recipient countries. - For a recipient country that receives remittances representing at least 10 percent of its annual GDP, a 1 percent decrease in the host country’s output gap will tend to decrease the recipient country’s output gap by almost 1 percent. - Remittances represent more than 30 percent of GDP for some countries, led by Tajikistan and Bermuda at more than 30 percent. - According to the World Bank, remittance flows are expected to drop by about $100 billion in 2020, which represents roughly a 20 percent drop from their 2019 level. - Impacts on recipient economies: - Loss of an important source of income and tax revenue just when needed most. - Banks in migrant-source countries rely on remittances as a cheap source of deposit funding; reduced remittances will increase banks’ cost of operations and greatly reduce their ability to extend credit. - Credit-constrained private sector—mostly self-employed people and small and medium-sized enterprises—will lose remittance funding and face tighter bank credit conditions plus lower demand. - Labor-market and migration dynamics: - Migrant workers who lose employment are likely to reduce remittances and could lose resident status in host countries, leading to return migration. - Return of migrants could increase unemployment and strain fragile public health systems in origin countries, heightening social pressure and possibly fueling spillovers and refugee flows. ### Global threat and macroeconomic consequences - This pandemic poses a greater threat to remittance-dependent countries than previous crises because it is global: recipient countries may face both capital outflows and drops in remittance flows simultaneously. - With global demand likely to suffer, remittance-recipient countries cannot rely on exports or tourism to offset the shock; currency depreciation will not spur demand for exports in this systemic crisis. - Currency weakness will worsen situations for low-income and fragile states with foreign-currency debt, depressing local demand and contracting local economies further. ### Policy implications and recommended actions - Urgency: The crisis tightens fiscal constraints in migrant-source countries just as public-sector demands increase (pandemic response and economic support), making international support critical. - Rationale for rich countries’ engagement: - It is in rich countries’ interest to keep migrants in host countries to sustain services and reduce virus transmission risk associated with mass returns. - Infection rates are higher in rich countries and especially high among migrant workers; returning migrants risk importing infections to fragile health systems, which could create global spillovers. - Three key actions to take now: 1. Stabilize migrants’ employment opportunities in host countries. - Relief packages that target employment protection for citizens can also help migrant workers remain employed. - Action by host countries preserves remittance flows and helps advanced economies restore production faster. - Example policy: targeted assurances, wage support, or employer coordination to keep migrants paid so they can send money home. 2. Support countries receiving returning migrants to contain and mitigate outbreaks. - Donor countries must help with the cost of virus mitigation to lessen the severity of local crises and stave off spillovers. - Priorities include enhanced testing in urban areas and support for quarantine measures for returning migrants. - Managed returns could yield longer-term benefits if repatriated migrants bring savings and skills home. 3. Provide fiscal and balance-of-payments assistance through international financial institutions and donors. - Ensure vulnerable people reliant on remittances can access social insurance programs. - Advance the global effort to meet Sustainable Development Goal 10 by reducing the high cost of remittances to 3 percent. ### Key statistics and factual takeaways - Remittances to low-income and fragile states: $350 billion as of 2018. - Expected remittance decline in 2020: about $100 billion, roughly a 20 percent drop from 2019 levels. - Sensitivity example: recipient countries with remittances ≥10 percent of GDP experience nearly a 1 percent drop in their output gap for a 1 percent decrease in host-country output gap. - Countries with remittances >30 percent of GDP include Tajikistan and Bermuda. *IMF Finance & Development, "The Impact of COVID-19 on Remittance Flows" — Antoinette Sayeh and Ralph Chami, June 2020.* --- ## Content in this bundle - **شرايين الحياة في خطر** - [شرايين الحياة في خطر (Markdown version)](/-/media/files/publications/fandd/article/2020/june/ar/sayeh.pdf.md){rel="alternate" type="text/markdown"} - [شرايين الحياة في خطر (PDF)](/-/media/files/publications/fandd/article/2020/june/ar/sayeh.pdf){rel="external" type="application/pdf"} - **The Impact of COVID-19 on Remittance Flows – IMF F&D** - [The Impact of COVID-19 on Remittance Flows – IMF F&D (Markdown version)](/-/media/files/publications/fandd/article/2020/june/covid19-pandemic-impact-on-remittance-flows-sayeh.pdf.md){rel="alternate" type="text/markdown"} - [The Impact of COVID-19 on Remittance Flows – IMF F&D (PDF)](/-/media/files/publications/fandd/article/2020/june/covid19-pandemic-impact-on-remittance-flows-sayeh.pdf){rel="external" type="application/pdf"} - **Una forma de sustento en peligro ● Finanzas y Desarrollo ● Junio de 2020** - [Una forma de sustento en peligro ● Finanzas y Desarrollo ● Junio de 2020 (Markdown version)](/-/media/files/publications/fandd/article/2020/june/es/impacto-de-la-pandemia-de-covid19-en-flujos-de-remesas-sayed.pdf.md){rel="alternate" type="text/markdown"} - [Una forma de sustento en peligro ● Finanzas y Desarrollo ● Junio de 2020 (PDF)](/-/media/files/publications/fandd/article/2020/june/es/impacto-de-la-pandemia-de-covid19-en-flujos-de-remesas-sayed.pdf){rel="external" type="application/pdf"} - **处于危险中的生命线 - 《金融与发展》 2020年6月号 - 国际货币基金组织季刊** - [处于危险中的生命线 - 《金融与发展》 2020年6月号 - 国际货币基金组织季刊 (Markdown version)](/-/media/files/publications/fandd/article/2020/june/zh/sayeh.pdf.md){rel="alternate" type="text/markdown"} - [处于危险中的生命线 - 《金融与发展》 2020年6月号 - 国际货币基金组织季刊 (PDF)](/-/media/files/publications/fandd/article/2020/june/zh/sayeh.pdf){rel="external" type="application/pdf"} - **Wp12104** - [Wp12104 (Markdown version)](/external/pubs/ft/wp/2012/wp12104.pdf.md){rel="alternate" type="text/markdown"} - [Wp12104 (PDF)](/external/pubs/ft/wp/2012/wp12104.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2020/06/covid19-pandemic-impact-on-remittance-flows-sayeh_