Remittances to Africa projected to decrease by 5.4% in 2021

Remittances to African countries are projected to decrease by 5.4% in 2021, falling from $44 billion in 2020 to a projected total of $41 billion this year, according to the latest Continental Migration Report. This decline is likely to have significant implications for both the individuals receiving the remittances and the economies of the countries where they reside. Saurabh Sinha, Chief of the Social Policy Section at the UN Economic Commission for Africa, highlighted several key points during an interview with CNBC Africa. Sinha explained that the recovery of remittances is closely tied to the recovery of the global economy and the sectors in which migrants are employed. Most African migrants tend to move within the continent, with North Africa being an exception as many migrants from that region move outside of Africa. The pace of recovery in the countries where migrants are employed will significantly impact the flow of remittances. Sectors such as tourism and construction, which require face-to-face interaction, are experiencing slower recoveries due to ongoing containment measures, leading to a decrease in remittances. Sinha emphasized the importance of understanding the nature of migrants and their employment sectors when predicting the impact of declining remittances. Countries with a high concentration of skilled migrants in sectors less affected by the pandemic may experience a smaller decline in remittances. On the other hand, countries with large numbers of unskilled or semi-skilled laborers working in sectors like South Africa's economy may face more significant challenges in remittance inflows. The decline in remittances is expected to have a substantial impact on both individual households and national economies. In sub-Saharan Africa, remittances make up an average of 2-3% of GDP, with some countries like Cabo Verde and Lesotho seeing even higher percentages. For households relying on these remittances, the sudden decrease in income can lead to financial strain and economic instability. The disruption in the flow of remittances caused by the COVID-19 pandemic has severed an essential source of income for many families in African countries. Despite earlier optimistic forecasts by the World Bank predicting a rise in remittances to sub-Saharan Africa, the reality has painted a different picture. The uncertainty surrounding the duration and extent of the global economic recovery has made accurate predictions challenging. The current decline in remittances underscores the complexities of forecasting economic trends amidst a constantly evolving crisis. While it is difficult to pinpoint specific countries that will experience the highest decline in remittances without comprehensive data, Sinha stressed the significance of understanding the profile of migrants in different regions. Countries hosting skilled laborers in less-impacted sectors may weather the decline better than those with a reliance on unskilled or semi-skilled workers in harder-hit industries. In conclusion, the impact of decreasing remittances on African countries extends beyond just economic numbers. It affects the livelihoods of millions of individuals who depend on these funds for their daily needs. As the world navigates through the challenges posed by the pandemic, finding sustainable solutions to support both the senders and recipients of remittances will be crucial for mitigating the adverse effects of diminishing financial flows.