The projected fall, which will be the sharpest decline in recent history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country.
India currently retains the top spot on remittances with 79 billion dollars followed by China (67 billion dollars), Mexico (36 billion dollars), the Philippines (34 billion dollars) and Egypt (29 billion dollars).
In 2019, remittance flows to low and middle-income countries were estimated at 554 billion dollars to become their largest source of external financing. Now they are projected to fall to 445 billion dollars, representing a loss of a crucial financing lifeline for many vulnerable households.
Studies show that remittances alleviate poverty in lower- and middle-income countries (LMICs), improve nutritional outcomes, are associated with higher spending on education, and reduce child labour in disadvantaged households.
A fall in remittances affects families' ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
"Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies," said World Bank Group President David Malpass.
"Remittances help families afford food, healthcare and basic needs. As the World Bank Group implements fast and broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities' access to these most basic needs," he said in a statement on Wednesday (local time).
The World Bank is assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affects remittance flows. It is working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.
Remittance flows are expected to fall across all World Bank Group regions, most notably in Europe and Central Asia (27.5 per cent), followed by Sub-Saharan Africa (23.1 per cent), South Asia (22.1 per cent), the Middle East and North Africa (19.6 per cent), Latin America and the Caribbean (19.3 per cent), and East Asia and the Pacific (13 per cent).
In 2019, remittance flows to LMICs became larger than foreign direct investments, an important milestone for monitoring resource flows to developing countries.
In 2021, the World Bank estimates that remittances to LMICs will recover and rise by 5.6 per cent to 470 billion dollars. The outlook for remittance, however, remains as uncertain as the impact of COVID-19 on the outlook for global growth and on the measures to restrain the spread of the disease.
( With inputs from ANI )