Pacific Money | Economy | Central Asia | South Asia

Remittances to South and Central Asia Poised to Dive Dramatically

South and Central Asia will see some of the largest declines in remittances in the wake of the COVID-19 pandemic.

Catherine Putz
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Remittances to South and Central Asia Poised to Dive Dramatically
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The World Bank projects global remittances to decline sharply across the world in 2020 due to the economic reverberations of the COVID-19 pandemic. Globally, remittances are projected to fall by 20 percent. Central Asia and South Asia will be hit especially hard, with remittance declines projected at 27.5 percent in the Europe and Central Asia region and 22.1 percent in South Asia. 

Kyrgyzstan, Tajikistan, and Uzbekistan had all benefitted in 2019 from a rebound in economic activity in Russia. The fate of migrant workers from Central Asia and the valuable remittances they send home will therefore be tied to how well, or not, Russia weathers the economic crisis brought on by the COVID-19 pandemic and the related dive in demand for oil.

Similarly, South Asia’s remittances flows will be impacted not just by the overall crisis, but oil troubles in the Gulf and Malaysia, in particular.

This cascade of crises — a pandemic into depressed oil demand — will mean not just less money flowing back into countries in South and Central Asia, but millions of unemployed individuals across the broader region. 

Given that remittances are credited with alleviating poverty in low and middle-income countries, with associated gains in nutrition, higher spending on education and reduction in child labor,  the World Bank warns that “[a] fall in remittances affect families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.”

Remittances to the Europe and Central Asia region in 2019 are estimated to have grown 6.6 percent to $65 billion; that is forecasted to tumble to $47 billion in 2020 and recover only marginally to $49 billion in 2021. In South Asia, remittances are estimated to have grown 6.1 percent in 2019 to $140 billion; in 2020 they’re forecasted to decline to $109 billion and recover slightly to $115 billion in 2021.

As some countries move out of the pandemic and re-open their economies, demand for oil is expected to rise. But how quickly a recovery can get started depends on a complex web of factors. For the countries of Central and South Asia for which remittances form an important source of income for households, their recoveries are dependent not just on their own governments succeeding in combating the pandemic but on governments far away “getting it right” too. 

As of May 5, Russia had confirmed 155,370 cases of COVID-19, making it the seventh most-affected country in infection terms — surpassing the number of cases officially reported in Turley, Iran and China. While the official death toll in Russia has remained relatively modest — 1,451 as of May 5 — the country continues to see sharp rises daily in the number of cases, especially among medical workers.

Until Russia recovers, Central Asia will be on tenterhooks regardless of the success (or lack thereof) of local handling of the pandemic. 

South Asian countries, like India and Pakistan, send migrants to a greater variety of countries and that diversity could be a boon as the world looks likely to recover at different rates in different regions.