An ongoing slower economic growth coupled with the Pandemic’s financial fallouts had goaded the NY-based multinational financial services company, Citibank, to trim its projections for global remittances this year, while the New York City lender had also told that the ongoing rout in global financial activities would heighten up the risks of potential downgrading of sovereign credit ratings of the smaller emerging market countries.
Aside from that, the 208-year-old American multinational lender had also added that the compounding narratives of a likely retreat in global remittances would pull up the emerging market countries’ borrowing cost. On top of that, in a client note revealed earlier on Monday, Citibank was quoted saying that the global remittances were headed towards a tattering of $100 billion in the worst-case scenario adding that the base case scenario would witness a plunge of $68 billion in global remittances.
Beside, latest downbeat projection from the American lender came forth a month after it had predicted that the remittances foreign workers were sending home would face off a shrinkage of $28 billion this year, while the latest projection had nearly tripled up the lachrymose lag in foreign remittances in 2020, which in effect would likely to hit the smaller emerging markets’ countries much harder-than-anticipated.
Smaller foreign-remittance based economies to bear the brunt as Global remittance to shrink by $100 billion
Meanwhile, since the cataclysmic outlook in global foreign remittances would leave smaller emerging market economies with little space to allay the hits stemmed from a steep drop in foreign remittances, raising the risks of being default on debt repayments, a Citibank analyst Dana Peterson wrote in a client note earlier on the day, “Declines in remittances may have negative implications for the sovereign debt ratings of small EMs (emerging markets).
Tajikistan and Sri Lanka are both at elevated risk of sovereign default, and have net inbound remittances that are sizable shares of own GDP”. Adding further strains on to the smaller emerging market economies’, the World Bank had projected in mid-April that the global remittances would likely to hit with a whiplash of record $142 billion this year, the biggest fall in foreign remittances since the broad-based adoption of market-oriented economies across the globe.