The Bretton Woods institution noted that over previous decades, remittances have played an increasingly important role in alleviating poverty and sustaining growth.
Just last year, the global financial institution said, these flows were on par with foreign direct investment and official development assistance (government-to-government aid).
“But COVID-19 has spurred a dramatic reversal, with our latest forecasts finding that remittances will decline 14% by the end of 2021 – a slightly improved outlook compared with the earliest estimates during the pandemic, that should not belie the fact that these are historic declines. All regions can expect a drop, with Europe and Central Asia seeing the steepest fall.
“Associated with these declines, the number of international migrants is likely to fall in 2020 – for the first time in modern history – as new migration has slowed and return migration has increased.
“These drops are cutting off a lifeline for many poor families in developing countries. Migrants’ remittances are crucial to households around the world , and as they decline, experts fear that poverty will rise, food insecurity will worsen, and households risk losing the means to afford services like healthcare.
“The pandemic slowdown has deeply impacted businesses and jobs. Around the world, companies – especially micro, small, and medium enterprises (MSMEs) in the developing world – are under intense strain, with more than half either in arrears or likely to fall into arrears shortly.
“To understand the pressure that COVID-19 is having on firms’ performance as well as the adjustments they are having to make, the World Bank and partners have been conducting rapid COVID-19 Business Pulse Surveys in partnership with client governments.
“These offer a glimmer of good news. Responses collected between May and August showed that many of these firms were retaining staff, hoping to keep them on board as they ride out the downturn. More than a third of companies have increased the use of digital technology to adapt to the crisis.
“The same data warned, however, that the firms’ sales have dropped by half amid the crisis, forcing companies to reduce hours and wages, and most businesses – especially micro and small firms in low-income countries – are struggling to access public support.
“Reduced family incomes – whether due to job loss, a stop in remittance payments, or a multitude of other COVID-19-related factors – will continue to put human capital at risk. With less money, families will be forced to make trade-offs and sacrifices that could harm health and learning outcomes for a generation.”