By Isaac Cohen*
From the perspective of low and middle-income economies, the economic impact of the pandemic immediately hurt commodity prices, significantly those of oil. Last week, the World Bank revealed another major setback for the developing economies, in the form of the “sharpest decline of remittances,” the money sent by migrant workers to their home countries.
The World Bank estimates that this year remittances to low and middle income countries will fall 20 percent, from $554 billion in 2019 to $445 billion in 2020. This contraction sets back what had become, for many developing economies, one of the main sources of financing and foreign exchange. In fact, the amount of remittances in 2019 reached a record, surpassing the amount of foreign direct investment flows, the other major source of external financing to developing countries which the Bank also estimates will d38.5ecrease even more, by 35 percent in 2020.
The three main recipients of global remittances in 2019 were India $83.1 billion, China $68.4 billion, followed by Mexico $38.5 billion. However, for several relatively smaller economies of Latin America and the Caribbean in 2019 remittances contributed a significant proportion of their economic activity, around 20 percent for El Salvador and Honduras; 13 percent for Guatemala and Nicaragua; 8 percent for Dominica, the Dominican Republic and Guyana.
The main impact for these relatively smaller economies, of the estimated 20 percent reduction in remittances, will be on increased poverty levels, through less spending in nutrition, education and health.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, TELEMUNDO and UNVISION and other media.
