India remittance to fall at a less drastic pace
The World Bank said India, followed by China, Mexico, the Philippines, and Egypt continue to be the top five countries in 2020 to receive foreign remittances
The World Bank has forecast that money transfer to India, the world’s largest recipient nation, would fall in 2020 by nine per cent to $76 billion — at a less drastic pace of decline than what it predicted in April — due to the ongoing coronavirus pandemic and global economic recession.
Making a less dismal forecast on global remittance outlook, the World Bank said India, followed by China, Mexico, the Philippines, and Egypt continue to be the top five countries in 2020 to receive foreign remittances.
The Washington-based bank said in its latest report that remittance flows to low and middle-income countries would fall by seven per cent, to $508 billion in 2020, followed by a further decline of 7.5 per cent, to $470 billion in 2021.
“As the Covid-19 pandemic and economic crisis continues, the amount of money migrant workers send home is projected to decline by 14 per cent by 2021 compared to the pre-Covid-19 levels in 2019,” the World Bank said in its Migration and Development Brief.
Dilip Ratha, lead author of the brief said: “The underlying fundamentals driving remittances are weak and this is not the time to take our eyes off the downside risks to the remittance lifelines.”
In April, the World Bank on a grimmer note predicted that while globally remittances would decline sharply by about 20 per cent in 2020, remittances to India are likely to drop by 23 per cent from $83 billion in 2019 to $64 billion this year due to the pandemic.
In 20219, India retained its position as the world’s number one recipient country by recording $83 billion in remittances. In 2018 and 2017 also India held on to its position as the top remittance-receiving country in the world by receiving $ 79 billion and $65.3 billion.
In 2018, remittance from the UAE to India was $13.82 billion and from Saudi Arabia $11.24 billion.
“The UAE has outperformed year-to-date the World Bank’s prediction of a 20 per cent worldwide decline trend by registering only 10.3 per cent drop. We expect to finish the year significantly better than the World Bank prediction,” said Rashed A. Al Ansari, CEO of Al Ansari Exchange.
“The UAE, which has seen incremental government and public support during the pandemic, maintained its global position as a hub of the expat community, with remittance volume exceeding $21 billion in the first half of 2020. This is equivalent to 48.2 per cent of the total money transferred by foreign residents in the country during 2019, which totaled Dh165 billion,” said Adeeb Ahmed, managing director, Lulu Financial Group.
Ahmed said India, which recorded $83 billion in remittances in 2019, is seeing a weakening on the remittances front, with 2020 H1 recording lesser inflows than 2019 H2.
Citing the latest data, Ahmed said remittances to India decreased to $14.89 billion in the first quarter of 2020 from $15.18 billion in Q4 2019, and this downward trend has continued in Q2 as well, with remittances touching a mere $12.42 billion.
“India has traditionally been the world’s largest recipient of remittances, and although the year has not fared as expected, we are hopeful that the final quarter will see some positive growth,” said Ahmed.
He said there is usually an increase in remittance activity in the second half, and the government’s recent decision to reopen the economy coupled with the onset of the festive season would hopefully balance the scales and provide better returns for the remittances sector in this final quarter.
Al Ansari said since May there has been a steady recovery in remittance flow thanks to the UAE’s prompt and effective actions to contain Covid-19, putting the wheels of the economy back in motion quicker than initially expected. “We are confident that this recovery trend will continue amid the easing of restrictions and the implementation of measures to stimulate tourism and other economic activities. Once an effective vaccine is adopted, we expect a strong rebound across various sectors.
The Gulf region is an important source of remittance flows, particularly for countries in South Asia. The region accounts for roughly half of remittance inflows in Bangladesh (58 per cent), Pakistan (54 per cent), Sri Lanka (45 per cent) and India (51 per cent).
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