Moody's Investors Service anticipated that the global economic downturn as a result of the COVID-19 outbreak will weigh on remittance inflows to low- and middle-income countries, which the World Bank projected to decline by nearly 20% to $110bn in 2020. It pointed out that remittance inflows originate mostly from members of the Group of 20 economies and from Gulf Cooperation Council (GCC) countries. It noted that the G-20 and GCC economies are experiencing a severe contraction in economic activity from the coronavirus pandemic and/or from the collapse in global oil prices, which resulted in job losses, particularly among migrant workers, and affected remittance outflows from these countries. Further, it anticipated that remittance inflows will partially pick up in 2021, but it said that they will remain below pre-coronavirus levels as it expected the global labor markets to recover slowly. 

In parallel, the agency anticipated that the decline in remittance inflows to low- and middle-income economies in 2020 will exacerbate the economic slowdown and external vulnerabilities in these countries. It noted that the expected drop in remittances in 2020 will amplify the growth shock of the virus for economies that significantly rely on remittances to finance consumption. As a result, it anticipated that the 20% decline in remittance inflows will reduce GDP by between 1% to 7% in 2020 in such countries. Further, it indicated that remittance inflows make up a significant share of current account receipts of most low- and middle-income sovereigns. As such, it forecast that the 20% fall in remittance inflows this year will result in an average drop of three percentage points of GDP in the current account balance of remittance-dependent economies. But it noted that most remittance-reliant countries are also net oil importers, and expected lower oil prices to partly mitigate the impact of lower remittances on their external balance. As such, it forecast the median current account deficit of these countries at 5% of GDP in 2020.
Source: Moody's Investors Service