CB forecasts 15% decline in worker remittances for 2020

• First time for CB to come up with a forecast on workers’ remittances income since COVID-19 outbreak 
• World Bank has already projected 19% decline in remittance income for Sri Lanka in 2020
• Reduction in remittance income could affect SL’s economic growth, investments, heighten credit risk 
• Moody’s does not expect reversal in decline in remittances, though partially until 2021

The Central Bank for the first time gave its forecast last week for the estimated decline in worker remittances expected in 2020 after the coronavirus related lockdowns around the world dampened the prospects for overseas jobs and such incomes. 

The Central Bank last week said they expect 14.6 percent decline in workers’ remittances for 2020 compared to 2019. 

“The workers’ remittances are expected to decline by about 14.6 percent by end 2020,” said Dr. Chandranath Amarasekara, Director of Economic Research at the 
Central Bank. 

Remittance income from migrant workers made a rebound starting from May after hitting the bottom in April, with June being most pronounced with the income reaching a pre-pandemic level of US$ 572.5 million, staging 6.7 percent growth from the same month in 2019. Hence, the first six months income from workers’ remittances in 2020 reached US$ 2.9 billion, down 8.9 percent from the same period in 2019. 

The World Bank earlier projected a 19 percent drop in the remittance income to Sri Lanka to US$ 5.4 billion this year from US$ 6.7 billion in 2019. 

The fall in workers’ remittances could weigh on the economic growth of countries heavily dependent on foreign income flows as such could cut into the incomes, consumption and thereby raising their credit risk, Moody’s Investors Service said last month. 

The rating agency does not expect a reversal in the decline in remittances, although partially until 2021.

There are hundreds of thousands of families in Sri Lanka who depend on the moneys remitted by their loved ones, who left for overseas employment seeking higher wages as they neither have skills nor the opportunities in Sri Lanka to earn a living wage for a better life.

A large majority of these job seekers leave for Middle East to work as domestic aids, which require little skills but there is a heavier toll on their families left behind and the society at large, which cannot be offset by the moneys they send back. 

However, the current climate in the aftermath of the coronavirus has re-enforced the need to bolster domestic production and the country’s industrial base, which would result in opening up many new job opportunities.

Already seen is a renaissance in the country’s industrial and agricultural sector with government patronage. 

Lower borrowing costs and trade facilitation services have also supported multiple sectors, which have allowed them to create new job opportunities.