Covid-19 and it’s Impact on Remittances Globally
Many migrant workers send money to their home country for family members, with the average worker sending back 15% of what they earn. This is an expensive process- 7% of that 15% is spent SOLELY on sending the money. According to the United Nations Department for Economic and Social Affairs, one in every nine people received a flow of money from abroad in 2019. Canada alone sent $6,116 million in remittances last year.
The amount of money sent to a country in remittances tends to exceed the amount sent in official development aid. Due to this, remittances can have a large effect on the development of a nation. Therefore, anything that impacts the amount of remittance sent or received will also affect the country as a whole, as well as the individuals giving or receiving money.
The Pandemic And Lockdown
On March 11, 2020, the WHO (World Health Organization) declared a COVID-19 pandemic. Soon after this, many countries began to go into lockdown. These lockdowns resulted in job losses for some and reduced hours for others. Many businesses that may have already been struggling had to close their doors permanently, causing a lower volume of jobs for the unemployed to apply for. Some of the jobs that were hit the hardest were those in the hospitality and tourism industries, which employed over 1.3 million people in Canada pre-COVID-19. Back in September, Statista predicted that lockdown could result in 263,000 job losses from a lack of tourism alone.
Many people receiving remittances are likely to have become even more dependent on this money due to job loss or receiving less money from their work. They could also need more money for medical expenses if they have been infected with COVID-19. In 2018, the country receiving the most remittances from Canada was China, the first country to be hit by COVID-19 and the first to go into lockdown.
Despite the increased need, COVID-19 made it more challenging to send remittances or, at the very least, the same amount of remittances. Some people have been laid off due to their companies being unable to stay open, while others have been unable to work due to health reasons. In April 2020, nearly 2 million people living in Canada lost their jobs. Even the end of lockdown will not mean that all of these people will be able to go back to work. As previously stated, some businesses have closed for good, and some companies have had to reduce their workforce. People suffering from long-COVID may struggle with symptoms, such as extreme fatigue, for months on end, impacting their ability to do their job. Also, people at high risk of COVID may be staying away from their job if said job involves being around many people who could pass on the disease.
Looking To The Future
While the number of unemployed people in Canada is not yet back to pre-COVID-19 levels, the numbers have been steadily decreasing since May. In May 2020, there were 26,192,000 people unemployed, which fell to 17,352,000 in November. These statistics appear to show that employment levels will soon return to normal. Overall, this could mean that remittances sent and received may not be affected in the long run. However, the same may not be said for individual remittances.
Like many other countries, China, the country receiving the most remittances from Canada, suffered a large increase in unemployment numbers, but the country appears to be recovering. According to Statista, the country’s unemployment rate went from 6.2% in February to 5.3% in October. The unemployment rate for China in 2019 was 4.32% and the four years preceding 2019 all held similar rates. This could suggest that while there was an increased need for remittances for a few months, that need is decreasing, and there may be no long-term impact.
With vaccines for Covid-19 now being used in some countries, the world should finally be able to come out of lockdown fully (assuming the vaccines work and succeed in providing herd immunity). With the end of lockdown, workers who were at high risk will be able to go back to work, businesses will be able to start rehiring, and tourism should increase. Without the same level of fear and restrictions surrounding traveling, there is likely to be more tourists bringing money to tourism and hospitality businesses.
It is impossible to know for certain what will happen with the pandemic and what impact the few months in lockdown will have, but it appears that there will be no long-term impact on remittances.