The amount of money that expatriates from developing countries will send home in the form of remittances will probably fall 7.3 percent this year and could hit poor nations hard, the World Bank said July 13.
The change could be significant, given the importance of remittances in some developing countries. Indeed, in countries such as Lesotho, Moldova and Tajikistan, remittances account for more than a quarter of their gross domestic product. The effects could be even worse in countries that have already suffered significant declines in foreign credit.
"Remittances provide a lifeline to many poor countries," said Dilip Ratha, lead economist in the Development Prospects Group of the World Bank. "Although they remain resilient, even a small decline of 7 or 10 percent can pose significant hardships to the people and to governments, especially those facing external financing gaps."
The duration of the crisis and its consequences on the amount of remittances could cause further damage for developing countries.
"There is a risk that rising unemployment will trigger further immigration restrictions in major destination countries," explained Hans Timmer, who heads the group. "Such restrictions would curb remittances more than forecast and would slow the global recovery in the same way as protectionism against trade would endanger a global upturn."
The World Bank expects remittances to rebound between 2010 and 2011.