Impact of Remittance and Current Global Financial Growth

Over the past couple of years, the global economy has taken several big hits from events such as the Covid-19 pandemic, the Russia-Ukraine war, and many more. Compounding the damage from the Covid-19 pandemic, the Russian Invasion of Ukraine has magnified the slowdown in the global economy. Entering what could become a protracted period of feeble growth and elevated inflation (World Bank’s Latest Global Economic Prospects report).There is a rising risk of stagflation with potentially harmful consequences for all middle- and low-income economies alike. Global growth is expected to slump from 5.7 percent in 2021 to 2.9 percent in 2022 which is significantly lower than the 4.1 percent that was anticipated in January. This state is hoped to hover around the pace over the next two years. Even though the economy is looking at a recovery phase post-pandemic, global financial growth is not up to the expected par just yet causing a slowdown for a significant period of time.

Foremost, the financial aspect of economies is a huge contributing factor to the economy, exchange rates, and much more. Hence, we take a closer look at global financial growth where there is higher than expected inflation, especially in the United States and major European economies, causing a tense situation of global financial conditions. Additionally, China’s slowdown has been worse than anticipated amid the pandemic outbreak and lockdown. There have also been further negative spill over from the war taking place in Ukraine. Thus, the global output contracted in the second quarter of this year. Growth has slowed from last year’s 6.1 percent to 3.2 percent this year and 2.9 percent next year, with downgrades of 0.4 and 0.7 percent points from April. Reflecting stalling growth in the world’s three largest economies, The United States, China, and Europe with important consequences for the global outlook (IMF blog-Pierre Oliver Gourinchas).This indicates numerically the slow down that has taken place financially on an international scale.

Furthermore, global financial growth affects the currencies of economies. The stagnation in the global financial state can affect currency growth and exchange rates. However, the USD isrelatively high at the moment, where the USD is equivalent to $2.38 Rupee against the Indian currency. On the other hand, the Asia- Pacific markets look ready to extend an overnight market slide. As for the stocks and shares news regarding the market exchange rate, the S&P 500 and Dow Jones Industrial Average posted losses of 0.75 percent and 0.32 percent at the closing bell (Tuesday’s Asia- Pacific outlook 11/10). An escalation in geopolitical tensions stemming from the situation in Ukraine and Russia Stepped-Up attacks that have reportedly targeted several cities, including Kyiv causing traders to be cautious. (Daily FX-Tuesday’s Asia- Pacific Outlook). However, the USD/JPY appears to be tracking the rise in the United States Treasury yields as it rallies for four consecutive days with the exchange rate on the cusp of testing the yearly high (48.90) as it extends the series of higher highs and lows from last week. As a result, USD/JPY may continue to appreciate ahead of the update to the US consumer Price Index (CPI) as it seems to be tracking a positive slope, and signs of sticky inflation may generate a bullish reaction in the Dollar (Daily FX).

Nonetheless, remittance is indirectly linked to financial growth, despite the global financial state as of May 11, 2022 (Washinton) officially recorded remittance flows to low and middle-income countries (LMICs) are expected to increase by 4.2 percent this year to reach $630 billion. This follows an almost record recovery of 8.6 percent in 2021(migration and development brief- World bank). The top 5 recipient countries for remittance in 2021 were India, Mexico, China, Philippines, and Egypt. Among countries where remittance inflows stand at very high shares of GDP are Lebanon (54 percent), Tonga (44 percent), Tajikistan (34 percent), Kyrgyz Republic (33 percent), and Samoa (32 percent) – (The World Bank). Resulting in an overall improvement in remittance presently.

In conclusion, global financial growth has a rather huge impact on economies and in turn remittances. The current global updates have stated that financial growth is approaching a stagflation state with current higher-than-expected inflation. This has caused economies in the United States and other countries to deteriorate considerably amid high inflation, tight labor market conditions, and aggressive monetary tightening by the federal reserve. However, the post-Covid-19 recovery time has helped improve remittances across the globe as borders open and labour migration has been on the rise again. This has caused remittance to recover post-pandemic and hold a better position at the moment. Here at Lotus Remit we aim to provide the most updated services with the best exchange rates so that our clients don’t get affected by the global financial situation. Hence, why Lotus Remit would be among the best choices for a money transfer service in South East Asia now and always.