The Remittance Effect: A Lifeline for Developing Economies Through the Pandemic and Into Recovery

The rising value of remittance flows into developing countries in recent years is often not widely appreciated. At a macro level, remittances support growth and are less volatile than other private capital flows, tending to be relatively stable through the business cycle. At a micro level, remittances benefit recipient households in developing countries by providing an additional source of income and lower incidences of extreme poverty. They act as a form of 'social insurance', supporting households' capabilities to resist economic shocks, increase spending on essential goods and services, invest in healthcare and education, enhancing access to financial services and investment opportunities.

Understanding the role and importance of remittances is particularly important at the current juncture, with the global economy experiencing a uniquely sharp and synchronized shock as a result of COVID-19. This report examines the available evidence on remittance flows and their potential economic effects. The report explores and shows how remittance flows remain a crucial lifeline in supporting developing economies through the current pandemic crisis and into the recovery.