In Bangladesh, the contribution of the remittance sector is significant particularly for stimulating poverty alleviation, improving the standard of living and creating productive assets (Islam, 2011; Bangladesh Bank, 2019). The country is the third-largest recipient of remittances within the South Asian region (Bangladesh Bank, 2019). According to the Bureau of Manpower, Employment and Training (BMET), Bangladesh has received a total of $213,178 million as remittances from 1976 to February 2020. Within these years, 13,028,410 expatriates have migrated abroad for employment, although many have returned back.
It is no longer unknown that the outbreak of Covid-19 is posing an unprecedented threat to the global economy, the Asian Development Bank observed. As a result, the world is witnessing one of the worst global financial crises in human history. Due to the "Great Lockdown," as described by the International Monetary Fund (IMF), financial instability may continue to extend and result in the closure of many economic endeavours – plus cause prolonged unemployment. The International Labour Organization mentioned about 25 million people will be at the risk of being unemployed, especially expatriates who are residing abroad. Its impacts on the status of employment for Bangladeshi expatriates, future flows of migration and remittance earnings for the country is thought to be negative.
The Covid-19 pandemic has already caused the suspension of many construction projects in many Middle-Eastern countries, including the Kingdom of Saudi Arabia (KSA), which is a prime source of remittances for Bangladesh. The authorities of KSA have decided to cut wages by about 25 percent to 50 percent due to the global lockdown because of the stagnation of major economic activities and also a fall in oil prices. To battle such an economic downturn, the Gulf countries may lay-off their workers, which will exacerbate the situation by leading to bulk unemployment, The New York Times reported. Before the ongoing global lockdown, a number of expatriates had to return back to Bangladesh, especially from the Gulf countries.
Amid the outbreak, 100,000 expatriates have returned back to Bangladesh from: the KSA, the UAE, Malaysia, Singapore, France, Italy, Bahrain, and other countries. Further, the return backflow, over time, may only increase if the situation does not improve soon. Consequently, prospective expatriates from Bangladesh numbering about 50,000 per month will find it difficult to migrate overseas for employment.
Nevertheless, remittance inflows of South Asian countries – like Bangladesh, India and Pakistan – have always exhibited an inelastic relationship with economic fluctuation. So, it is necessary to understand how the remittance sector might be affected due to the great lockdown resulting from the Covid-19 pandemic.
Bangladesh received an amount of $16.42 billion as remittances in FY2018-19, while the amount was $12.5 billion till February for FY2019-20. Under a business as usual scenario – without the impacts of Covid-19 – positive growth in the remittance sector of Bangladesh with an estimated receipt of about $19,174.35 million in FY2019-20 would be possible. This could be 17 percent growth compared to the previous year. For the next five to 10 years, there would be steady growth of remittances, about five to six percent, and Bangladesh would receive about $25,337.97 million as remittances in FY2024-25. However, the outbreak of Covid-19 has changed the overall scenario of the remittance sector for the country.
Remittance earning for a country depends greatly on host countries' economic activities, GDP growth and labour demands. The IMF on April 14, 2020 made a comprehensive forecasting of the global GDP change – considering the spillover effects of the Covid-19 pandemic on major global economic sectors, including: tourism, entertainment, hospitality, travel, and others. It is expected that due to the outbreak of Covid-19 pandemic, the remittance sector will face prominent losses incurring from the negative changes in the per capita GDP of major host countries of Bangladeshi expatriates like: Qatar, the UK, the KSA, Italy, and others.
Based on this IMF data, potential changes in remittance inflows for Bangladesh have been estimated by employing a regression analysis. The outcomes suggest that the incoming remittance loss for the country is estimated to be about $3,021.81 million and $3,440.10 million in 2020 and 2021, respectively. The estimated loss in remittance inflow for Bangladesh would be 16 percent and 17 percent, respectively. Although the economy may be commencing to recover, from the next fiscal year, 2020-21, as suggested by many, the inflow is expected to remain low.
Another forecasting conducted by using the World Trade Organization (WTO) proposed three scenarios – V-shaped, U-shaped, and L-shaped. These correspond with a recovery period lasting three months, six months and more than a year, respectively.
The WTO also suggests a similar outcome for remittance inflows for Bangladesh. In the first case, the effects of the pandemic are expected to diminish relatively quickly, whereas the economy may take six months to revive in case of the second scenario. The worst case is the third scenario; where the impacts of the pandemic are expected to be prolonged, and the economy is projected to be in a downturn situation for an indefinite period of time.
Considering the above-mentioned scenarios, remittance inflows have been forecasted for Bangladesh for 2020 and 2021. Findings from this projection indicate that if the economy takes three months to recover – the V-shaped trend – after the end of lockdown, the country may face an 18 percent and 20 percent loss in remittance earnings in 2020 and 2021, respectively. The loss of remittances can increase to 22 percent and 21 percent considering the six months recovery period – U-shaped trend. Lastly, the prolonged duration recovery phase – L-shaped recovery – might cause a loss of 24 percent and 26 percent of remittance inflows for the country accordingly.
The estimated loss of remittance earnings for Bangladesh, due to the impacts of the Covid-19 outbreak – based on both the IMF's projections on global GDP loss and the WTO's proposals on three recovery periods – suggests that the anticipated remittance loss can be more than $ 3-5 billion for 2020 and 2021, while the loss may further increase if the economy takes six months or more to recover from the impacts of Covid-19. The loss would be about 16-24 percent of the expected remittance earnings for Bangladesh for 2020 and 2021.
As remittances play a vital role in Bangladesh's socio-economic advancement, maintaining its balance of payment and strengthening foreign currency reserves, any decrease in remittance inflow due to the breakout of Covid-19 may jeopardise the country's economic progress and poverty eradication. Against this backdrop, it is thus important that the country undertakes all possible immediate and long term measures to minimise the negative impacts on remittance inflow and ensure a sustainable future flow of remittance earnings for the country.