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Lifelines in Danger

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Jun 4 2020 (IPS) – The COVID-19 pandemic is crippling the economies of rich and poor countries alike. Yet for many low-income and fragile states, the economic shock will be magnified by the loss of remittances—money sent home by migrant and guest workers employed in foreign countries.

Remittance flows into low-income and fragile states represent a lifeline that supports households as well as provides much-needed tax revenue. As of 2018, remittance flows to these countries reached $350 billion, surpassing foreign direct investment, portfolio investment, and foreign aid as the single most important source of income from abroad (see Chart 1). A drop in remittance flows is likely to heighten economic, fiscal, and social pressures on governments of these countries already struggling to cope even in normal times.

Remittances are private income transfers that are countercyclical—that is, they flow from migrants into their source country when that country is experiencing a macroeconomic shock. In this way, they insure families back home against income shocks, supporting and smoothing their consumption. Remittances also finance trade balances and are a source of tax revenue for governments in these countries that rely on value-added tax, trade, and sales taxes (Abdih and others 2012).

In this pandemic, the downside effect of remittances drying up calls for an all-hands-on-deck response—not just for the sake of the poor countries, but for the rich ones as well. First, the global community must recognize the benefit of keeping migrants where they are, in their host countries, as much as possible. Retaining migrants helps host countries sustain and restart core services in their economies and allows remittances to recipient countries to keep flowing, even if at a much-reduced level. Second, donor countries and international financial institutions must also step in to help migrant-source countries not only fight the pandemic but also cushion the shock of losing these private income flows, just when these low-income and fragile countries need them most.

Transmission of shocks

Remittances are income flows that sync the business cycle of many recipient countries with those of sending countries. During good times, this relationship is a win-win, furnishing much-needed labor to fuel the economies of host countries and providing much-needed income to families in the migrants’ home countries. However, this close business cycle linkage between host and recipient countries has a downside risk. Shocks to the economies of migrant-host countries—just the sorts of shocks being caused by the coronavirus pandemic—can be transmitted to those of the remittance-recipient countries. For example, for a recipient country that receives remittances representing at least 10 percent of its annual GDP, a 1 percent decrease in the host country’s output gap (the difference between actual and potential growth) will tend to decrease the recipient country’s output gap by almost 1 percent (Barajas and others 2012). Remittances represent much more than 10 percent of GDP for many countries, led by Tajikistan and Bermuda, at more than 30 percent (see Chart 2).

The pandemic will deliver a blow to remittance flows that may be even worse than during the financial crisis of 2008, and it will come just as poor countries are grappling with the impact of COVID-19 on their own economies. Migrant workers who lose their employment are likely to reduce remittances to their families back home. Recipient countries will lose an important source of income and tax revenue just when they need it most (Abdih and others 2012). In fact, according to the World Bank, remittance flows are expected to drop by about $100 billion in 2020, which represents roughly a 20 percent drop from their 2019 level (see Chart 3). Fiscal and trade balances would be affected, and countries’ ability to finance and service their debt would be reduced.

Banks in migrant-source countries rely on remittance inflows as a cheap source of deposit funding since these flows are altruistically motivated. Unfortunately, these banks are now likely to see their cost of operations increase, and their ability to extend credit—whether to the private sector or to finance government deficits—will be greatly reduced (Barajas and others 2018). Furthermore, the typically credit-constrained private sector—mostly comprising self-employed people and small and medium-sized enterprises—is likely to lose remittance funding, in addition to dealing with even tighter credit conditions from banks. All this will come on top of lower demand for their services and products as a result of the crisis.

That’s not all. A prolonged crisis could worsen pressure in labor markets of rich countries, and out-of-work migrants could lose their resident status in host countries and be forced to return home. For example, in Gulf states such as Saudi Arabia and the United Arab Emirates, which rely on migrant labor from the Middle East, North Africa, and Southeast Asia, the drop in the price of oil and economic activity could result in migrants (some of whom are already infected with the virus) returning home. They are likely to join the jobless in their home countries—in labor markets already brimming with unemployed youth—as well as put more pressure on already fragile public health systems. This could heighten social pressure in countries already ill prepared to deal with the pandemic and possibly also fuel spillovers beyond their borders. People escaping tough situations in their own countries are likely to seek other shores, but richer countries, also in the midst of fighting the virus, may have very little desire to allow migrants in—potentially leading to an even greater refugee crisis.

Global threat

Compared with previous economic crises, this pandemic poses an even greater threat to countries that rely heavily on remittance income. The global nature of this crisis means that not only will recipient countries see remittance flows dry up, they will simultaneously experience outflows of private capital, and maybe a reduction in aid from struggling donors. Typically, when private capital flees a country because of a macroeconomic shock, whether climate related or because of a deterioration in the country’s terms of trade, remittance flows come in to lessen the impact of capital flight. By contrast, in this current crisis, poor countries can expect to experience both phenomena—capital flight as well as a drop in remittance flows.

With global demand likely to suffer, it would be hard for remittance-recipient countries to export their way out of this crisis. Currency depreciation cannot be expected to spur demand for their exports or attract tourism since this shock is systemic (Barajas and others 2010). Currency weakness will likely worsen the economic situation for many of these low-income and fragile states whose debt is in foreign currency, further depressing local demand and resulting in greater shrinkage of local economies.

What can be done?

The crisis has the unique effect of tightening fiscal constraints in low-income migrant-source countries just when there’s much more for the public sector to do, both in terms of protecting the population from the pandemic and supporting local economies in weathering huge negative shocks. The loss of tax revenue resulting from the drop in remittance- supported consumption will only make things worse for governments already strapped for funds and severely strain their ability to engage in countercyclical fiscal measures. This creates tremendous urgency for the international community to help, even when rich countries are themselves facing huge fiscal burdens.

It is in the best interest of rich countries for migrants not to go home as well as to provide resources for poor countries to fight the pandemic. Infection rates are much higher in rich countries and are especially high among migrant workers owing to their dismal working and housing conditions. Migrants who go home are at risk of taking the virus with them. If this happens, poor countries will provide a rich incubator for the virus that will boomerang as refugees seek new shores. Then it will take decades—and many lives—for the world to be rid of this virus.

Three key actions need to be taken now.

First, host countries need to stabilize the employment opportunities of the migrant workers in their economies. Relief packages that target employment protection for citizens in rich countries can also help migrant workers remain employed. Recognizing the need to protect and stabilize the welfare of migrant workers, the prime minister of Singapore recently assured migrant workers in his country that “we will look after your health, your welfare, and your livelihood. We will work with your employers to make sure that you get paid and you can send money home . . . This is our duty and responsibility to you and your families.” Action by host countries can help keep the remittance lifeline alive, as well as reduce the likelihood of migrants returning home.

Extending protection to migrants will also help advanced economies get back to full production sooner. If host countries send migrants back, it will take even longer to restore production in rich countries to former levels. In countries such as the United States that depend on seasonal labor, keeping migrants within their borders and enhancing testing for infection will bring a double benefit—ensuring the supply of fresh agricultural products for the host country and preserving remittances for migrants’ home countries.

Second, countries receiving returning migrants will need help to contain, mitigate, and reduce the escalation of outbreaks. Donor countries must help with the cost of virus mitigation, in an effort to lessen the severity of the crisis in local economies and stave off potential spillovers.

Returning migrants are likely to place further stress on the health care systems of migrant-source countries, which are struggling to contain local infections and avoid a shutdown of the local economy. Authorities in these countries will need enhanced testing as much as possible in urban areas, as well as support in implementing quarantine measures for returning migrants who may be infected. If the return of migrants is handled in this manner, there could be longer-term benefits for their home countries as well. Migrants who expect to be permanently repatriated may bring their savings with them, and their work skills could bring development benefits to their home countries.

Third, given that poor countries’ governments have limited room for maneuver, these countries will need the assistance of international financial institutions and the donor community. International financial institutions need to shore up fiscal and balance of payments assistance to these countries. This should include ensuring that these countries’ most vulnerable people—those most reliant on remittance inflows for their consumption and well-being—are able to access social insurance programs. And, perhaps now more than ever, the global effort to meet Sustainable Development Goal 10, reducing the high cost of remittances to 3 percent, could take center stage.

This crisis makes it clear that as a global community we, rich and poor countries, are all in this together. We can either lift all boats or, together, face the consequences of rising social inequality.


21 Comments on "Lifelines in Danger"

  1. rockman on Thu, 18th Jun 2020 11:20 am 

    oh sweet jeebus!, I just let one rip and followed through!. I have only just finished cleaning myself up 30 minutes later. Just letting all you ‘consumers’ know the covid is still around and its gonna make a few more sharters out of us before it gets better !

  2. Davy on Thu, 18th Jun 2020 11:22 am 

    yeah me too ! the stench from my lav this morning is unbelievable. Ive lost 7 pounds in last 4 days.
    The covid weight loss program.

  3. Abraham van Helsing on Thu, 18th Jun 2020 11:25 am 

    On the way home from the red light district and picking up some mary jane biscuits my bowels also gave way.
    In the Netherlands it is still an offence to shit in public so I was very lucky as I squelched and slid home in much haste.

  4. JuanP on Thu, 18th Jun 2020 11:27 am 

    You guys don’t know how lucky you are!, try catching covid on a bean diet us beaners have! . Talk about double trouble, I have lived it amigo!

  5. The actual inner thought of the covid shart itself on Thu, 18th Jun 2020 11:35 am 

    Double, double toil and trouble;
    Colon burn and stomach bubble

  6. Duncan Idaho on Thu, 18th Jun 2020 12:14 pm 


  7. FamousDrScanlon on Thu, 18th Jun 2020 12:54 pm 

    Where’s the my beef? C’mon, get those disposable essential workers back on the line. I’s hungry & cheap.

    Worker shortage concerns loom in immigrant-heavy meatpacking industry

    “The brothers — who declined to be identified for fear of workplace retaliation — are among roughly 175,000 immigrants in U.S. meatpacking jobs. The industry has historically relied on foreign-born workers — from people in the country illegally to refugees — for some of America’s most dangerous jobs.

    Now that reliance and uncertainty about a virus that’s killed at least 20 workers and temporarily shuttered several plants fuels concerns about possible labor shortages to meet demand for beef, pork and chicken.”

    US meatpacking workers hesitant to return to work despite executive order

    US meatpacking unions report that scores of employees remain off the job due to either quarantine or fears of contracting COVID-19, despite an order from President Trump mandating their return to work.

    Surely if trumpy deports them, all unemployed white folks will be lining up the very next day to cut & pack your cheapest in the world meat. We don need no stinkin immigrunts.

  8. Cheer, Cheer the Yanks are Here on Thu, 18th Jun 2020 1:54 pm 

    “Trump’s Poll Numbers Are So Bad the GOP Is Starting to Panic About a ‘Wipeout’”

    GOP strategists working on Senate and House races told VICE News that they’re seeing Trump’s numbers plunge in states and districts across the country.

  9. Abraham van Helsing on Thu, 18th Jun 2020 5:07 pm

    And it will always end in the same manner.

  10. makati1 on Thu, 18th Jun 2020 5:24 pm 

    This could be a problem for the Philippines as thousands of foreign workers come home due to the new flu. They all have families to come back to and will survive as usual, but a lot of condos in the cities will return to the sellers as the payments dry up. Car sales will drop.

    The general Philippine economy will likely slow for the next few years, but not as bad as in the West. Philippine debt to GDP is around 50% not the 110+++% of Amerika. Amerika better hope that those working in the US don’t come back as there will be a huge shortage of nurses and doctors in the US.

    The US was trying to entice those professions to come to the US with instant visas and high pay because the US needed them for the new flu. Too bad for the US that President Duterte said “NO!” and kept them here where they might be needed more. The US is always trying to plunder other countries for their resources, but the world is on to their plundering and is saying “NO!” moreand more. A good thing.

  11. Theedrich on Thu, 18th Jun 2020 11:08 pm 

    T’was Cap’n Ahab Lincoln, the great Negrifier, who set Afroids loose on America.  His stupendous orgasm was achieved by killing 820,000 Whites.  And his Jeezus-driven army of White genosuicidists was a forerunner of all the White “Coon-Lives-Matter” pus seen infecting U.S. cities today.

    It is no accident that two WHITE women arsonists set fire to a Wendy’s restaurant near the scene of a cop-resisting Black death in Atlanta several days ago.  Just more of the Yid-Cretin religion in action.  Consonant with that, the genetically corrupt Negroid D.A. of Fulton County, Atlanta, Paul L. Howard, Jr., didn’t bother with legal niceties like waiting for a Georgia Bureau of Investigations report on the suicide-by-cop of the Coon in question before issuing a charge of murder against the hapless officer who shot the criminal.  The Negress mayor natually went along with the charade.  After all, White civilization must be destroyed.  (Just ask the two White female arsonists.)

    Meanwhile, the Yid media are having a field day blaming all jungle-bunny crime on President Trump.  Perhaps we can next expect a constitutional amendment condemning all Whites (except Dem Commies) to death.  And as burrhead rioters and their nihilist White accomplices destroy city after city, the Left exults in the termination of 4.65 billion years of evolution.

    But who cares?  There must be other planets somewhere that can succeed in developing high intelligence with chimpanzoid extraterrestrials at the top.  Here, the prospect of White death is such fun.

    All of the Kike media promote Marxist demands by politicos such as Bernie Sanders, Ilhan Omar, Alexandria Ocasio-Cortez, Maxine Waters and the like, who seek the “fundamental change” of “evil” White civilization in a Stalinist direction.  Their White façade for a presidential candidate is Alzheimer’s patient Joe Biden, who sits permanently dazed in a Delaware basement.  But behind the shreiks for expelling Donald Trump from the White House, lies a much darker motive:  conversion of the nation into a dictatorship of omnicidal Soviet Socialist Republics.  Run, of course, by megaJews.

    R. J. Rummel (1932-2014), professor emeritus of political science and a Nobel Peace Prize finalist, has documented the numbers resulting from what he terms as “democide,” or death by government (262 million), in the twentieth century.  The vast majority of these deaths were caused by Communism, and his conclusion is that democide is caused by unrestrained power itself.  “[S]everal times more people were killed in democide (genocide and mass murder) by governments than died in warfare.”

    This is the direction in which the rulers of the Yidbox are leading the country.  Few people have the historical understanding to grasp this, let alone can bring themselves to admit it is absolutely true.

    No matter what the Sinistrals say about President Trump or the evils they allege of White “racism” and the supposed “suffering” of criminal Negro Mongoloid idiots, they are nothing compared to the abyss into which they are leading us.  Even assuming Trump to be the clown they say he is, and that his exhibitionist and other eccentricities are all true, if the Democrat Commies succeed in gaining complete power (House, Senate and Executive Branch) in November 2020, they will deliver us into the hands of Satan himself.

  12. Chuck Schumers boyfriend on Fri, 19th Jun 2020 4:55 am 

    Gosh darn it!, Im turning orange like my glorious leader Trump!. It must be the covid virus and 2 weeks of sharts !
    Its turns ya orange guys so watch out!

  13. FamousDrScanlon on Sat, 20th Jun 2020 12:39 am 

    Florida reports nearly 4,000 new coronavirus cases, a record single-day increase

    Bye bye Grand-ma. Bye bye Grand-pa. Thanks for leaving me your Palm Beach property that’ll be worthless in a decade due to sea level rise. Thanks Boomer Grand-cunts! Even in death they screw their Millennial Grand-brats.

  14. joe on Sat, 20th Jun 2020 1:26 am 

    relax snowflake, the adults are getting you a vaccine, a cheap one. See China killed your grandma through their silence, yet you blame Trump. But hes still l8ves you xxxx.

  15. Abraham van Helsing on Sat, 20th Jun 2020 2:07 am 

    Meanwhile from a different part of the third world, soon in a street near you, if it were up to duncan and drscamloon:

  16. zero juan on Sat, 20th Jun 2020 5:11 am 

    A night with the lunatic:
    FamousDrScanlon said Florida reports nearly 4,000 new coronavirus cases…

    FamousDrScanlon said Islamic Golden Age The Islamic Golden Age was a pe…

    FamousDrPerfectlyPreservedKoranIsVariant said muzzies have a variant quran that improves over ti…

    FamousDrScanlon said Why are the lab escape denialists telling such bra…

    FamousDrMuzzieLover said above is supertard supertard sock obv.

    FamousDrScanlon said Why Are There So Many Humans? The populations of t…

    FamousDrScanlon said BP Statistical Review of World Energy 2020: Carbon…

    FamousDrScanlon said Chesapeake Energy Was Once the Second Biggest Natu…

  17. Abraham van Helsing on Sat, 20th Jun 2020 5:17 am 

    “Wealthy Homeowners In ‘Mad Rush’ To Flee San Francisco”

    Everybody with a brain and opportunity is leaving the big cities, read: moving away from “diversity”. Must be “racist”, all.

  18. Abraham van Helsing on Sat, 20th Jun 2020 5:33 am 

    The DailyMail can’t get enough of the humiliating pictures of a white guy beaten up by a bro at Macy’s in Flint:

    No outright condemnation of the violence by the DM mob, instead soft-support for the action because of the alleged use of the N-word.

    “He was asking for it”.

    No need for white despair though. One euro-wimp with a machine gun, is stronger than 1000 Mike Tysons, who only have their fists. For that we need a complete meltdown of social order in Anglosphere first. It’s underway.

  19. Davy on Sat, 20th Jun 2020 5:56 am 

    “Wealthy Homeowners In ‘Mad Rush’ To Flee San Francisco”

    LOL, the cloggo is reading ZH but he once whined about them. cloggo, the US is in a cultural and political CW2. Around here there is little BLM shit and Covid was minimal. Life is back to normal although some people wear masks. You are deranged about only a part of it in the US and dismiss any of it in your neighborhood. This shit that is running rampant with the extremist liberals globally is a product of Europe. Own it fool.

  20. Davy on Sat, 20th Jun 2020 6:01 am 

    “No need for white despair though. One euro-wimp with a machine gun, is stronger than 1000 Mike Tysons, who only have their fists. For that we need a complete meltdown of social order in Anglosphere first. It’s underway.”

    Most Euros don’t know how to use a gun and many don’t know how to fight. This is why your militarizes are subpar. When you talk about a complete meltdown you show how delusional you are. There is no complete meltdown in the cards. It is just a routine American event that happens once or twice a decade of social unrest. Steam is blowing off. It is in Europe too but you ignore it.

  21. Abraham van Helsing on Sat, 20th Jun 2020 8:35 am 

    Countdown to Trump Tulsa rally in ten hours!

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