As the toll of the COVID-19 economic shutdown reverberates around the world, money sent home by foreign workers is drying up. Hundreds of billions of dollars are sent every year from countries where immigrants work to countries they call home or where they still have family members. According to the World Bank, these remittances are a lifeline for individual families and some national economies, accounting for a fifth of El Salvador’s and Honduras’ gross domestic product, and more than a third of Haiti’s.
Ford School economics professor Dean Yang told the Los Angeles Times in an article published April 22, 2020, that historically, remittances have helped developing countries weather shocks, such as natural disasters or civil unrest. Yang has studied the flow of remittances to the Philippines. When a prolonged drought gutted the Philippines’ agricultural sector in the 1990s, Yang said, families with relatives working abroad were able to replace about 60 percent of income lost to the crisis through remittances.
But “this is an unusual crisis,” he said, “in that the whole world is suffering.”
A World Bank report states that remittances will fall by 20 percent, from $554 billion in 2019 to an expected $445 billion this year. During the 2008-2009 financial crisis, the drop was 5 percent.
Even as they plummet, remittances will become more important than ever to low- and middle-income countries.
The Los Angeles Times article can be found here.
Dean Yang is a professor of public policy and economics. His research is on the economic problems of developing countries. His specific areas of interest include: international migration, microfinance, health, corruption, political economy, and the economics of disasters. Dean teaches a Ford School course on the economics of developing countries, as well as a PhD course in development economics. He received his undergraduate and PhD degrees in economics from Harvard University.