Oxford Economics, in conjunction with Western Union, has released its new research report “The Remittance Effect: A Lifeline for Developing Economies Through the Pandemic and Into Recovery.” This report sheds new light on the critical role remittances play in not just the everyday economic lives of citizens in the world’s developing economies, but the absolutely indispensable role they will play in the next several years as these countries work to overcome the aftereffects of COVID.
The value of remittance flows into developing countries in recent years is widely underappreciated. Remittances support stable macroeconomic growth, benefiting recipient households in developing countries by providing additional income and lowering incidences of extreme poverty. This money acts as a form of ‘social insurance,’ helping recipients to support spending on essential goods and services, invest in healthcare and education, and build both liquid (cash) and fixed (property) assets.
The report says that in the current economic climate, with the sharp global shock resulting from COVID-19, remittance flows remain a crucial lifeline supporting developing economies through the pandemic crisis and into the recovery. Although remittances slowed during the pandemic, they remained more resilient than other private capital flows, making them even more important as a source of foreign inflows for receiving countries. In fact, the report says, remittance flows often increase in times of crisis, an example of ‘altruistic’ giving by ‘Economic First Responders’ that often runs counter to prevailing economic cycles.