Remittances to Mexico could fall 17% in 2020 and recover between 2023-2028 due to Covid-19

Summary

Due to the uncertainty regarding its duration, it is difficult to estimate the impacts of the Covid-19 crisis on the flow of remittances to Mexico. This article makes an estimate based on the effects of the past global financial recession of 2008/2009 on remittance flows. Three scenarios are presented.

Key points

• Key points:
• Scenario 1: It is estimated that remittances to Mexico could contract more than 21% between 2020 and 2021, and recover up to 10 years from now, in 2028. Remittances could have contracted by 17% in 2020, with which they would be located in an amount close to 29,900 md.
• Scenario 2: If various factors are considered, such as: 1) the construction sector in the U.S. could have less affectations than the service sector, 2) the lowest proportion of undocumented Mexican migrants in that country, and 3) the greatest dynamism of remittances observed in recent years, it is estimated that remittances could exceed by 2024 the record amount of 2019 remittances.
• Scenario 3: In addition to the factors considered in scenario 2, although the effects of the Covid-19 crisis are more acute, if the economic recovery is much more accelerated, remittances could recover their historical maximum by the end of 2023.
• Michoacán, Oaxaca and Zacatecas would be the states most affected by a decrease in remittances, since they are equivalent to 10% or more of their state GDP.

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