MICROFINANCE PAPER WRAP-UP: “COVID-19 Crisis Through a Migration Lens,” by Dilip Ratha et al, published by World Bank Group

This paper explores the impact of the COVID-19 pandemic on past and potential future trends in international economic migration and remittances. The first section focuses on the general impact of the pandemic, considering topics such as changes in the earnings of migrant workers, declines in remittance flows and policy responses. The second section delves into the cost of remittances and migration patterns in six regions: East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, the Middle East and North Africa (MENA), South Asia, and Sub-Saharan Africa. The main findings include:

(1) Amidst the COVID-19 pandemic, migrant workers are more susceptible than others to wage losses and unemployment. Referring to a previous financial downturn, the authors note that from 2007 to 2009 the unemployment rate among foreign-born workers in the EU increased by 5.3 percent, whereas the increase for native workers was 3.8 percent. Sectors in greater need of workers during the pandemic, such as the health sector, require “specific skills,” making it difficult for many unemployed workers to switch into new jobs, especially if they are informal workers or residing in a country without documentation.

(2) Although some migrant workers who lose their jobs will return home, the rate of voluntary return migration is “likely to fall,” because of travel bans and suspended transportation services. Meanwhile, migrants are particularly vulnerable to infection with COVID-19 as many face one or more of the following challenges: overcrowded living conditions, lack of access to healthcare, postponed resolution of asylum cases or displacement due to armed conflict. In response to these difficulties, some governments have offered migrants cash transfers, shelter and health services. Spain has released some detainees, for example, and Guatemala and El Salvador have requested postponement of deportations of their citizens from the US.

(3) As a result of migrants’ declining income, remittances in low- to middle-income countries (LMICs) are expected to fall 20 percent in 2020 from USD 554 billion the previous year. Under a projected “prolonged and arduous” economic recovery, remittances to LMICs are estimated to recover by less than 6 percent in 2021 to USD 465 billion.

(4) Remittances are expected to fall in all six regions. In Latin America and the Caribbean, the fall is expected to be greatest because remittances to that region primarily come from countries heavily impacted by the pandemic: Italy, Spain and the United States. In Europe and Central Asia, MENA, and South Asia, remittances are expected to decline due to falling oil prices. Meanwhile, South Asia was the “least costly region” to which to send remittances, as a result of “high volumes, competitive markets, and deployment of technology.” Sending money to sub-Saharan Africa, on the other hand, was found to be the “most costly.”

(5) Remittance service providers (RSPs) have experienced disruption due to “lockdowns, reduced business hours, and social distancing.” Meanwhile, as of the first quarter of 2020, the global average of remittance costs stood at 6.8 percent, more than double the UN’s Sustainable Development Goal (SDG) target of 3 percent. While digital payments may lower the cost of remittances, many poor migrants and recipient households lack access to digital accounts. Some countries have responded by encouraging or pressuring RSPs to lower fees. The authors argue, “It would be important for RSPs and authorities to work together to mitigate the effects of the crisis and encourage the adoption of digital payments, greater use of regulated channels, and wider availability of cost-efficient services.”

By Jessica McLeod, Research Associate

This is a summary of a publication by Dilip Ratha, Supriyo De, Eung Ju Kim, Sonia Plaza, Ganesh Seshan and Nadege Desiree Yameogo; published by the World Bank Group; April 2020; 42 pages; available at http://documents1.worldbank.org/curated/en/989721587512418006/pdf/COVID-19-Crisis-Through-a-Migration-Lens.pdf

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