Unstable patterns in cross-border financial transfers
In recent months, the global economy has been grappling with the unprecedented challenges posed by the Covid-19 pandemic. This turmoil has had a ripple effect on various sectors, including the remittance market.
In April, remittances to Mexico experienced a setback, marking a negative growth. This contrasts with the spike observed in March, when remittances saw a significant increase of 35%. The strong depreciation of the Mexican peso against the US dollar in March may have contributed to this spike, making remittances in pesos more valuable to recipients.
However, the full impact of the Covid-19 pandemic and currency volatility on remittance flows is still not clear. The World Bank predicted a 20% decline in remittances for 2020, but examples of countries that experienced more moderate declines have not been explicitly identified.
The US, the largest sender of remittances to Mexico, is currently experiencing challenging market conditions. These conditions are likely to continue exerting pressure on remittance flows to Mexico. The extent to which the Covid-19 pandemic will structurally change economies around the world is not certain, but it is clear that the pandemic continues to have an impact on the global economy, and its effects on remittance flows are yet to be fully understood.
As more people return to work in their host countries, trends in remittances are expected to stabilize. However, the market for remittances remains highly volatile and is influenced by fluctuations in exchange rates. Currency volatility is likely to enter the market and may impact remittance flows.
The future of remittance flows is dependent on the course of the Covid-19 pandemic and currency market conditions. As the world navigates these uncertainties, it is crucial to monitor these trends closely to gain a better understanding of the impact on Mexico's economy and its people.
