Overseas remittances are expected to fall short of the target this year due to the economic crisis caused by the COVID-19 pandemic and shutdowns around the world.

Nguyen Hoang Minh, Deputy Director of the State Bank of Vietnam’s HCM City Branch, said in the first seven months of the year total remittances to the city, usually the largest recipient in the country, were down 1.2% year-on-year to US$3 billion.

Vietnam has been among the top 10 recipients in the world for the last three years. Last year its remittances topped US$16.7 billion, of which US$5.3 billion came to HCM City.

Money transfer companies said in the first two quarters the strongest drops in remittances to the city were from Vietnam’s key labour markets such as Japan, Taiwan and the Republic of Korea, and other key countries such as the US, UK and Canada. 

Some reported up to a 50% decline in the money transferred through their companies.

Remittances from Europe were down the most followed by the US, Canada and Australia, they said.

Dr Can Van Luc of the Bank for Investment and Development of Vietnam (BIDV) expected remittances to drop by 10-15% this year, but could be even worse if the pandemic continues having bad changes happenings. 

Many analysts say the global pandemic has shown few signs of ending, while Vietnam is facing a second wave, and this could cause remittances to fall by up to 40 percent in the worst-case scenario. 

According to the United Nations Development Programme (UNDP), 60% of remittances to Vietnam comes from the US, which accounts for 50% of all overseas Vietnamese. Europe accounts for around 20% while other major sources are China, the Republic of Korea and Japan. 

Dr Nguyen Tri Hieu, a banking analyst, said a majority of the overseas remittances comes from ethnic Vietnamese nationals of other countries.

Because of the pandemic many of them have lost their jobs or seen their businesses hit.

The World Bank expects global remittances to fall by 20% this year, with East Asia and the Pacific seeing a 13% decrease. This would be the largest single-year decline in remittances in a century. The last global financial crisis saw remittances drop by 5% in 2009, the bank said.

The World Economic Outlook has forecast global growth in 2020 of minus 4.9%, a further 1.9 percentage points down from the April prognostication. 

The pandemic has had a greater impact on activity in the first half than anticipated, and the recovery is projected to be more gradual than previously forecast.

The US’s GDP decreased at an annual rate of 32.9% in the second quarter of 2020, according to the "advance" estimate released by the country’s Bureau of Economic Analysis. In the first quarter the GDP had decreased by 5%.

The incomes of overseas Vietnamese living in the US has been badly affected, limiting transfer of money to their families.

The World Bank estimates that in 2021 remittances to low and medium income countries will recover and rise by 5.6% to US$470 billion. But the outlook remains as uncertain as the impact of COVID-19 on the outlook for global growth.

Vietnamese experts too believe that remittances to the country will depend on how countries around the world combat the pandemic.