Amid Global Turmoil, Foreign Workers Send Less Money Home
Worker remittances fell 12.9% over the same period last year and 13.6% over the previous quarter.
With every part of the global economy under stress due to the Covid-19 pandemic, it was expected that overseas workers will send less money home to their families as they lose jobs and income in countries where they work. In April, the World Bank predicted a sharp 20% decline in global remittances, cautioning that this could impact a “crucial financing lifeline for many vulnerable households.”
Since then, early data for remittance flows into emerging economies has shown some conflicting trends. While transfers have fallen, the pace of decline has been less than feared.
In the case of India, net worker remittances dropped to $11.69 billion in the April-June 2020 quarter, down from $13.534 billion in the January-March 2020 quarter, according to Balance of Payments data published by the Reserve Bank of India on Sept. 30. Since the December 2019-ended quarter, remittances have fallen from $14.2 billion to $11.7 billion in the three months ended June.
This year-on-year decline is lower than the December 2015 quarter, when plunging oil prices led to a near 30% drop in worker remittances. It is also not as sharp as the 27% year-on-year decline in private transfers seen in the March 2008-ended quarter, when the global financial crisis hit.
In 2009, the RBI reported overall private transfers and didn’t disclose worker remittances separately. However, the latter makes up a large share of private transfers and the two are directionally comparable.
The fall in remittances was remarkably muted, despite the adverse economic conditions globally amid the ongoing pandemic, said Aditi Nayar, principal economist at ICRA.
Sergi Lanau, deputy chief economist at Institute of International Finance, said while the drop in remittances is sharp, it isn’t unprecedented.
We saw similar declines [in worker remittances] in 2015 when falling oil prices also put pressure on the incomes of migrant workers in the Middle East. What makes the current situation harder to handle is that, unlike 2015, India is in deep recession, with many households needing income from abroad more than ever.Sergi Lanau, Deputy Chief Economist, Institute of International Finance
Data from the IIF shows that remittances to other countries have also shown some degree of resilience, albeit not across the board.
In the region, we saw a similar decline in remittances to Sri Lanka but more resilience in countries like Bangladesh, said Lanua. “Globally, the picture is heterogenous. Mexico saw increasing remittances through the crisis, probably due to extensive income-support programmes in the U.S. In contrast, the Philippines suffered a 10% decline in April-June relative to the preceding quarter,” Lanua said. The behaviour of remittances depends a lot on the specific destinations people from a certain country migrated to and the sectors they work in, he said.