The COVID-19 crisis had a major adverse impact on the global economy. GDPs of most countries declined. Amid the new restrictions several Latin American and Caribbean nations reported plummeting remittance volumes. Many countries took strong measures to get back on the road to economic recovery.
The Dominican Republic has emerged victorious in this struggle. The country has managed to put its remittances back on the growth path.
Over the last 5 years the Dominican Republic was a fast growing Caribbean economy. According to the World Bank the country’s economy grew 5.3% annually since 1993. The pace accelerated during 2014-2018 with growth rates of 6-7%.
Remittances had a role to play in this success story. In 2018 remittances to the Dominican Republic accounted for more than 7% of the country’s GDP. Remittances have a positive impact on domestic consumption, savings, and investment. These factors have long term benefits for national economic growth. Remittances to the Dominican Republic averaged $312.9 million between 1993 and 2020. Since the 1990s remittance inflows grew on average by 5% annually. In 2018 the country received $6.8 billion in global remittances. This represented 23% of the total remittances received by all countries in Central America during that year. It also made the Dominican Republic the second highest remittance recipient country in the region.
Impact of COVID-19.
The World Bank projection for 2020 is that global remittances will decline by 20%. This could be the largest decline in recent history. Remittances to the Dominican Republic declined sharply in the first half of 2020. In April the country received merely $395 million. This was a 48% decrease compared to the April 2019 figure of $585.2 million.
The crisis also had a negative outcome for remittance sending costs. COVID-19 lockdowns caused most offices to close. Most government and private sector employees had to work remotely. Many were not able to work at all. With limited resources the speed and efficiency of most financial services decreased. Access to cash and foreign exchange services became restricted. Operational challenges faced by remittance service providers led to an increase in the cost of transferring remittances to Latin America and the Caribbean. The situation was exacerbated by an increase in cyber crimes and scams. Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) controls became stricter, which further reduced access to financial services.
Remittances and socioeconomic growth.
A study conducted by the Economic Commission for Latin America and the Caribbean (ECLAC) expounded on the criticality of remittances for the region. The study found that 72% of all remittances sent to Caribbean countries are used by recipient families toward their daily needs such as food and housing. Remittances enable education for millions of children. They are the only source of savings for a multitude of communities. Dominicans work hard overseas to send money to Dominican Republic to support their families. This has a direct impact on the socioeconomic development of the nation. Moreover remittances act as compensation for the brain drain caused by the emigration of skilled Dominicans. This builds a strong case to form policies that favor remittances and remittance senders. Integrating migration with public policies would further harness the development potential of emigration.
Recent growth in remittances.
The OECD stated that the global economy is bouncing back better than expected from COVID-19. The Dominican Central Bank reported that remittances to the country increased to $827.7 million in July 2020. This is a real achievement when compared to $640.3 million received in July 2019.
The Dominican Central Bank also reported that employment in many sectors had increased during the third quarter of 2020. With the creation of 4.8 million jobs in June the unemployment rate in the country reduced by 2.2%. The current unemployment rate stands at 11.1%.
A World Bank report stated that there are 221,133 entrepreneurs and MSMEs in the Dominican Republic. They benefit from the improved access to finance and financial services. The Caribbean bank, Banco Caribe introduced a “Maximum” savings account which is ideal for clients who want to maintain their remittances in dollars. The new account type offers an attractive and a profitable solution for people who wish to diversify their portfolio in hard currency.
There is more positive news for overseas Dominican workers. Ria has launched a new promo. There will be a $0 fee on money transfers sent from overseas bank accounts to recipients in the Dominican Republic for cash pick up in DOP via Ria Money Transfer. Here’s another reason to send larger remittances and support your loved ones.