Remittance Inflow, Investment, and Economic Growth in Africa amidst COVID-19 Pandemic

Abstract

Africa has fared well in the aspect of remittance receipts in recent years; however, the region recorded a decline in remittances amid the COVID-19 pandemic which constrained the circular flow of income significantly and ultimately economic growth. In view of this, this study investigates the economic effects of remittance inflows and investment on economic growth in Africa amid COVID-19 pandemic using a panel of 48 economies and estimated with pooled OLS and two-step system GMM. The study employed two distinct approaches for estimation; pre-COVID-19 (2010–2019) and amid COVID-19 (2010–2023). The results indicate that the behavior of remittances, investment and economic growth in Africa is not significantly different between pre-COVID-19 and amid COVID-19. That is, remittances remain a significant economic growth catalyst in Africa whereas investment is not (though with growth effect potential). Overall, the study concludes that African economic policy stakeholders and other relevant policy authorities should sustain the current remittance and labor policy frameworks with possible fine-tuning where applicable while doubling their investment efforts especially in productive sectors of the economy.