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Six reasons why remittances soared in South Asia during COVID-19

Remittance flows are a major source of income for all countries in South Asia, larger than all other capital inflows combined. In 2019, India received more remittances than any other country in dollar terms, and Nepal ranked third in the world in terms of remittances to GDP at 27 percent. Remittances seem to have been even more essential during the COVID-19 pandemic, increasing by 5.2 percent in 2020 in South Asia. But this was somewhat surprising because household surveys globally showed remittances falling, especially in the second quarter of 2020.

So, what happened in South Asia? Many studies indicate that remittances tend to increase when receiving households experience disasters or recessions. However, since the COVID-19 shock was global in nature, both home (recipient) and foreign (sender) countries were impacted. Migrant workers, many of whom- in North America, the EU, and the Middle East- are employed mostly in contact-intensive services sectors were particularly hard hit by COVID-19.