The Remittance Effect: Global Citizens Emerge as Economic First Responders of the Developing World
Person-to-person ("P2P") international transfers, or remittances, sent by global citizens to their homelands represent the largest foreign economic support structure for developing economies. According to a new report by Oxford Economics, commissioned by Western Union (NYSE: WU), a global leader in cross-border, cross-currency money movement, remittances have helped smooth COVID-19 pandemic-induced economic shocks, increasing the resilience of developing nations throughout 2020 and presenting a potential lifeline for recovery in 2021 and beyond.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210127005359/en/
The Remittance Effect: Global Citizens Emerge as Economic First Responders of the Developing World (Graphic: Business Wire)
The Oxford Economics Report: The Remittance Effect: A Lifeline for Developing Economies Through the Pandemic and Into Recovery identifies several positive economic and remittance consumer fundamentals that could support unexpected strength in remittance flows to developing nations compared to World Bank forecasts of slowdown in 2021.
The report states that global P2P transfers to developing nations, which surpassed the value of Foreign Direct Investment in 2019, can potentially achieve what overseas development aid (ODA) and private direct investment cannot - the P2P transfers quickly and efficiently put money directly into the hands of individuals who then use the money to fund a broad range of economic activities. This "Remittance Effect" drives profound gains for developing economies, including reducing poverty and driving increases in economic activity. In addition to being engines for growth, P2P transfers enhance connectivity by linking individuals worldwide, thereby contributing to economic, social, and political interdependence between nations, even as governments shut borders.
"The research further shines a light on the resilience of this global web of financial interconnectivity and confirms what Western Union has witnessed repeatedly: Crises make people more determined to provide support to the people they care about. When times get hard in developing economies, remittance-senders become front-line workers of economic security," said Hikmet Ersek, President and CEO of Western Union.
"This report justifies bestowing a new title of 'Economic First Responders' upon these global citizens and local heroes. The love and money they send across the world's borders have helped smooth the economic shocks from the pandemic and foster resiliency and recovery within their home nations throughout 2020 and into 2021 and beyond," he added.
The World Bank estimates that the pandemic will push an additional 88-115 million people into extreme poverty, with the total potentially rising to as many as 150 million in 2021. The developing world, home to many of the world's most economically vulnerable people, will face the most extreme consequences.
To avoid the economic divide, Western Union is encouraging policymakers across the spectrum to prioritize legal, smart, safe, and equitable cross-border migration systems, which will uplift developing nations' economies and continue to support developed economies to recover and address human capital shortages.
Ersek added, "In the critical task of rebuilding developing nations in a post-pandemic world, millions of these Economic First Responders will continue to step up. These heroes deserve so much credit for the irreplaceable role they play in their host and home countries' economies. There has also simply never been a greater need for innovation and technology that provides the on-the-ground financial support flowing instantly across borders." Read blog.
For 170 years, Western Union has been focused on connecting individuals to their families and loved ones globally, anytime, anywhere, and today, it continues to connect them through one of the world's largest global financial networks that move 130 currencies electronically worldwide within minutes.
Oxford Economic report - Key Highlights
Remittances were a silver lining in a cloudy 2020 for developing nations.
Positive data for 2020 on remittance inflows from several central banks in receiving countries, positive earnings data from leading money transfer companies, as well as survey evidence indicating the resiliency of senders, who have been highly motivated to support families and loved ones back home, have all supported a stronger than expected potential outturn for remittances in 2020.
- Positive data for 2020 on remittance inflows from several central banks in receiving countries, positive earnings data from leading money transfer companies, as well as survey evidence indicating the resiliency of senders, who have been highly motivated to support families and loved ones back home, have all supported a stronger than expected potential outturn for remittances in 2020.
Family ties and rebounding economies may prove resilient for remittance flows, potentially exceeding World Bank forecasts for 2021.
- The remittance outturn for 2021 could fall anywhere within a wide range between a decline and a return to the pre-pandemic trend of growth, as uncertainty around the outlook is high.
- The World Bank forecast of a further 7.5% slowdown in 2021 may be exceeded. As predicted by the World Bank, a cumulative fall of 14% over 2020 and 2021 would be unprecedented in the recent history of remittance flows, which have tended to trend upwards year-over-year.
- Positive economic trends, sender economy recovery, sender resilience, and high demand for remittance from receiver countries could combine to support unexpected strength in remittance flows to developing nations in 2021.
A predicted rebound of GDP growth in sender economies, as vaccines are rolled out, restrictions are lifted, fiscal policy remains supportive and pent-up demand is released, augurs well for remittances in 2021.
Remittances are the hidden engine of global connectivity; people are single-handedly responsible for the massive capital movement across the world's borders.
- Financial flows between individuals/people contribute to interdependence worldwide – social, economic, and political. It is unmatched by any other type of public or private cross-border investment flows.
- Remittance flows are directed to meet the recipients' specific needs in developing economies. In comparison, governments' fiscal response and flows of overseas development aid (ODA) can sometimes be delayed and blunter in their application. Also, developing country governments have less budgetary capacity to support their economies.
- While the World Bank estimates that remittances fell by 7% in 2020, this decline will be significantly less severe than the expected decline in private investment capital. UNCTAD expects foreign direct investment (FDI) to develop economies to decline by 35% to 45% in the full year 2020.
Remittances multiply through a nation's economy contributing 0.40 cents GDP for every USD1.0 of inflow.
- The .40 cents multiplier is comparable or higher than some multiplier estimates of FDI or ODA.
- Applied to the $548bn of developing-country remittance inflows in 2019, this translates to a direct GDP impact on these economies of $219bn.
Remittances have short-run effects on national output, as additional spending is received as income elsewhere in the economy. However, the full economic benefits of remittances are only realized in the long term due to the transformative effects of increased spending on education, health, and other investments.
Remittances represent social insurance for households in developing countries.
At a micro level, remittances benefit recipient households in developing countries by providing an additional income source that helps fund essential expenditures, lowers the incidence of extreme poverty, shields them against economic shocks, and supports long-term investment in healthcare and education.
- At a micro level, remittances benefit recipient households in developing countries by providing an additional income source that helps fund essential expenditures, lowers the incidence of extreme poverty, shields them against economic shocks, and supports long-term investment in healthcare and education.
The global clout of remittances is underappreciated, despite being the largest foreign capital inflow to developing markets (excluding exports).
Remittance flows to developing economies are indispensable, exceeding ODA by a factor of three. According to the World Bank, remittances to developing countries totaled $548bn in 2019, overtaking FDI to become the largest inflow of foreign capital (excluding exports) to developing markets.
- Remittance flows to developing economies are indispensable, exceeding ODA by a factor of three. According to the World Bank, remittances to developing countries totaled $548bn in 2019, overtaking FDI to become the largest inflow of foreign capital (excluding exports) to developing markets.
A robust study of the remittance 'multiplier' is critical, as the current modeling is inadequate and underestimates the real effects.
- The remittance 'multiplier' is lower than one due to the impact of 'leakages' – some of the funds are saved or used to pay off debt (not spent), while a high share of spending in developing economies is likely to be on imported goods (e.g., medicines). A lack of investment opportunities in developing economies may also explain why remittance flows often fail to generate self-reinforcing development. However, a more complete measure of remittance economic impacts that also captures their longer-term transformative effects would likely result in more extensive estimates of the multiplier effect.
- Existing research on multiplier impacts is fragmented in terms of time periods covered, methods used, the multiplier definition, and the range of impacts measured.
- There is an opportunity to bridge the gap in existing research to measure the remittance multiplier more comprehensively and consistently across countries, looking at the individual effects of different use of funds and factoring in other country-specific characteristics.
About Western Union
The Western Union Company (NYSE: WU) is a global leader in cross-border, cross-currency money movement and payments. The company's omnichannel platform connects the digital and physical worlds and makes it possible for consumers and businesses to send and receive money and make payments with speed, ease, and reliability. As of the end of September 2020, the Western Union network included over 550,000 retail agent locations offering branded services in more than 200 countries and territories, with the capability to send money to billions of accounts. Additionally, westernunion.com, the fastest-growing channel in 2019, is available in over 75 countries, plus additional territories, to move money worldwide. Western Union moves money for better with our global reach, connecting family, friends, and businesses to enable financial inclusion and support economic growth. For more information, visit www.westernunion.com.
About Oxford Economics
Oxford is a leader in global forecasting and quantitative analysis. Our worldwide client base comprises more than 1,500 international corporations, financial institutions, government organizations, and universities.
Headquartered in Oxford, with offices around the world, we employ 400 staff, including 250 economists and analysts. Our best-in-class global economic and industry models and analytical tools give us an unmatched ability to forecast external market trends and assess their economic, social, and business impact. For more information visit www.oxfordeconomics.com/all-services.
For further information please contact:
Western Union Global Communications: Pia De Lima; Pia.DeLima@wu.com
Western Union EU&CIS: Nicholas Mandalas; Nicholas.firstname.lastname@example.org
Western Union Middle East & Africa: Mohamed El Khalouki; Mohamed.ElKhalouki@wu.com
Western Union Asia-Pacific: Karen Santos; Karen.Santos2@wu.com
About Business Wire
For more than 50 years, Business Wire has been the global leader in press release distribution and regulatory disclosure.
Subscribe to releases from Business Wire
Subscribe to all the latest releases from Business Wire by registering your e-mail address below. You can unsubscribe at any time.
Latest releases from Business Wire
PMI Launches Free, Online Course and Tool Kit to Help Changemakers Jumpstart Project Success in Just 45 Minutes2.3.2021 19:00:00 EET | Press release
Project Management Institute (PMI), the world's leading association for project professionals and changemakers, today announced the launch of KICKOFF, a new, free online course and tool kit to help introduce anyone doing project-based work to the best practices and tools needed to effectively manage projects from ideation to execution. Much of the working world revolves around projects, which have become more complex than ever due to global Megatrends, including COVID-19, climate change, and more. The need for changemakers, regardless of industry or position level, to be well-versed in the principles of project management in order to help drive results, has never been greater. KICKOFF is the ideal solution for those who are new to doing project-based work and would benefit from learning project management skills to help successfully navigate the process from idea to launch and execution. The course is packed with digestible content, downloadable templates, a glossary of key terms, and
Xendit Raises US$64.6 Million Series B Led by Accel to Scale Its Digital Payments Infrastructure Ushering in a New Era of Economic Security and Reliability in Southeast Asia2.3.2021 18:08:00 EET | Press release
Xendit, the fastest growing digital payments infrastructure for Southeast Asia, announces it has raised US$64.6 million in a Series B round led by Accel to deliver more secure and reliable economic success in the region. Altogether, the company has raised $88 million in funding. Amid Southeast Asia’s rapid digital transformation, Xendit is quickly bolstering businesses of all sizes, processing more than 65 million transactions with US$6.5 billion in payment value annually. “Southeast Asia is a massively complex region, with Indonesia having 17,000 different islands alone—not to mention the region’s regulatory and technological challenges. Trying to build the businesses of tomorrow on yesterday's infrastructure is holding Southeast Asia’s businesses back,” said Moses Lo, CEO and Co-Founder. “This latest investment will enable Xendit to scale our digital payments infrastructure quickly and provide millions of small and medium-sized businesses across Southeast Asia with an on-ramp to the
Andersen Global Initiates Expansion Into Bermuda2.3.2021 17:30:00 EET | Press release
Andersen Global establishes a presence in Bermuda through a Collaboration Agreement with Hamilton-based law firm Alexanders, Barristers & Attorneys, adding additional coverage to its global platform. Founded in 2005, Alexanders, Barristers & Attorneys is a law firm with a primary focus on corporate and trust laws. The firm provides services to corporate clients and high net worth individuals, which complements the U.S. member firm’s practice and the global organization’s ability to meet clients’ cross-border needs in Australia, Canada, Africa, the United Kingdom and globally through its member firms and collaborating firms. Additionally, the firm specializes in intellectual property registration and law, investment fund formation and law, insurance company formation and law, and admiralty and maritime law. “Our top priority is delivering best-in-class solutions to our clients locally and abroad, and our ability to do that has been and continues to be a key contributor to our firm’s suc
BORN Expands With Alkeon B2B Market Network Platform Transforming Commercial Models, Starting With the Trade Show Industry2.3.2021 17:12:00 EET | Press release
BORN, announces the expansion of innovative B2B subsidiary Alkeon, the world's first global SaaS market-network combining content, community, and commerce to connect buyers and sellers through a best-in-class platform, powered by machine learning. The 2020 pandemic generated a tremendous and immediate need for companies of all categories to pivot at a moment’s notice, with over 10,000 global trade shows completely upended due to cancellations of physical events. BORN, a purpose driven lifestyle company dedicated to reimagining the discovery, transaction and connection of the B2B and B2C communities, found an opportune moment to quickly scale and enhance their technology solutions. The company formally established Alkeon, an enterprise dedicated to supporting the needs of companies who are adapting to the current and future landscapes and need the right partner to support them through the process. Combining aesthetic and function to create designed technology, Alkeon is a market-network
South Africa and France Lead the Way in Public and Private Sector Gender Diversity, Latest Research by Kearney Reveals2.3.2021 17:00:00 EET | Press release
The latest ‘Gender Equality Report’ from Kearney has revealed progress in the representation of women in both public and private sectors, but the figures still don’t show parity. Ahead of International Women’s Day, the analysis provides insight into the progress of gender diversity in private and public sectors across nine countries – the United States, United Kingdom, Australia, India, France, Spain, Germany, South Africa and Singapore. The annual report revealed that France was number one for representation in the private sector with women comprising nearly 44% (43.8%) of board members on average, however only 2% of these women held top board positions. The UK (36%) and Australia (34%) also scored highly for representation of women on boards. The average for board level representation of women is 29.9% - not even one in three. % Female board level representation by country France 43.8% UK 36.0% Australia 34.0% Germany 32.5% Spain 29.8% US 29.8% South Africa 28.5% Singapore 17.3% Indi
beqom Announces beqom FlexFS, a Compensation Management Solution Dedicated to Financial Services2.3.2021 17:00:00 EET | Press release
beqom, provider of cloud-based compensation management software, today announced the launch of beqom FlexFS, a solution designed specifically for the financial services (FS) industry. “Financial services compensation is unique,” says Vismay Gada, Head of North America and Global Financial Services at beqom. “First there is a broad spectrum of financial services companies—retail banking, investment banking, asset management, hedge funds, insurance, private equity, and so on. That means that rewards and deferred compensation structures have many specialized needs across the industry. And, companies in each segment have to deal with different regulations that impact compensation treatment, which has its own unique challenges. Our FS customers have come to us to help them address complex compensation requirements that are beyond the scope of what their core HR systems can handle.” “We usually see a lot of our FS companies use Excel or Access databases to augment the limitations of core HR
Kymeta and Blue Edge Global Strategic Partnership Delivers Real World SATCOM Field Training with Military Trained Specialists2.3.2021 17:00:00 EET | Press release
Kymeta (www.kymetacorp.com), the communications company making mobile global, announced today a new premier training partnership with Blue Edge Global, a privately owned and operated, certified Service-Disabled Veteran Owned Small Business. The partnership is designed to provide instructor-led responsive training solutions for land, air, sea, and space domains where uninterrupted communications are required to enable high risk missions, first responder arrive-ready solutions and where natural or other disasters require immediate logistical support. Together, Kymeta and Blue Edge Global will offer downrange training with a team of military SATCOM specialists to the Department of Defense (DoD), Ministry of Defense (MoD) and Emergency Services teams globally. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210302005134/en/ Military specialist attends advanced SATCOM training. (Photo: Business Wire) The collaboration with Blue Ed
In our pressroom you can read all our latest releases, find our press contacts, images, documents and other relevant information about us.Visit our pressroom