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The volatile state of remittance flows

In the past weeks, we talked about how the World Bank forecasted a 20% decline in remittance in 2020. While the market is highly volatile and strongly influenced by fluctuations in exchange rates, some of the example countries below have been showing far more modest declines than what was predicted by the World Bank in April.

Remittances to Mexico experienced a 35% spike in March. This is largely due to the strong depreciation of the Mexican peso against the US dollar, which pushed more Mexicans in the US to send remittances back home given their higher value in pesos. In April, remittances to the country experienced negative growth, proving that the spike observed in March was unusual and that the negative market conditions affecting the US economy (largest sender of remittances to Mexico) are likely to continue to exert downward pressure on the flows. 

As more people return to work in their host countries, we can expect the trends to stabilise. How the year develops though is still unknown and much depends on how the Covid-19 will structurally change the economies around the world, which is still not certain, and by how much currency volatility enters the market.

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