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The Importance of Migration and Remittances for Countries of Europe and
Central Asia
Sudharshan CanagarajahMIRPAL Coordinator
Lead Economist, World Bank
11th of September 2012
Messages Migration and remittances continue to be a key pillar of
development strategy of many countries in Europe and Central Asia
Crisis has impacted new migration flows but, in general, migrants are not returning, that is, migration stock is still rising
Remittances proved to be resilient to economic shocks in host countries for those countries which have permanent migration, but effects were more pronounced in countries which rely on seasonal migration
Migration and Remittance Trends
Remittances projected to grow in medium-term
$ billion 2010 2011e 2012f 2013f 2014f
Developing countries 332 372 399 430 467 East Asia and Pacific 95 107 115 125 135 Europe and Central Asia 37 41 45 49 55 Latin America and Caribbean 57 62 66 72 77 Middle-East and North Africa 40 42 45 47 50 South Asia 82 97 104 113 122 Sub-Saharan Africa 21 22 24 25 27
Growth rate (%)
Developing countries 7.7% 12.1% 7.2% 7.8% 8.4% East Asia and Pacific 10.6% 12.6% 7.3% 8.0% 8.7%
Europe and Central Asia 0.3% 12.6% 8.8% 10.1% 11.4% Latin America and Caribbean 0.9% 7.7% 7.6% 7.9% 8.2% Middle-East and North Africa 19.5% 5.7% 5.1% 5.3% 5.5%
South Asia 9.5% 18.2% 7.4% 7.9% 8.4% Sub-Saharan Africa 1.9% 8.5% 6.3% 6.8% 7.4%
CIS countries have large (and increasing) migrant populations so remittance flows will
remain significant for many years
Source: World Bank’s Migration and Remittance Factbook 2011
Figure: Migration stock as percent of total population
The Global Economic Crisis Did Not Create Significant Disruption of Migration Flows as Many Feared
Data on migration inflows and outflows is limited in many countries
Overall, there has been little evidence of return migration caused by the economic downturn in host countries
One reason is that incomes and employment opportunities back home are not that high
Second, migrants are unwilling to return home fearing that they may not be able to re-enter
Financial incentives for return migration (Spain, Japan, Gulf countries) are not working
Remittances Represent a Significant Source of External Financing
Tajik
istan
Moldova
Kyrgyz
R.
Kosovo BiH
Albania
Serb
ia
Armen
ia
Monteneg
ro
Georgi
a
Macedonia
Ukraine
Bulgaria
Lithuan
ia
Romania
Latvia
Azerbaij
an
Croati
a
Slova
kia
Estonia
Poland
Hungary
Czech R.
Belaru
s
Slove
niaRussi
a
Kazakh
stan
Turke
y0%
5%
10%
15%
20%
25%
30%
35%
Remittances as share of GDP, 2010 (%)
0
20
40
60
80
100
120
140
160
180
200 $ billions
Remittances vis-à-vis Other External Inflows to Europe and Central Asia
Source: Migration and Development Brief 17
Remittances Have Been Growing Over the Last Decade in Most Sub-regions of Europe and Central
Asia; the Global Crises Disrupted this Trend but Recovery is on the Way
Remittance inflows (in USD million)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e -
5,000
10,000
15,000
20,000
25,000
30,000
35,000
RussiaOther CISEU-10BalkansTurkey
Source: World Bank
In CIS Countries, the Effects of the 2008-09 Crisis Were Most Visible in Tajikistan and Moldova: Both Countries Have High Seasonal Migration to Russia
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e -
1,000
2,000
3,000
4,000
5,000
6,000
ArmeniaAzerbaijanBelarusGeorgiaKazakhstanKyrgyz RMoldovaTajikistanUkraine
Remittance inflows (in USD million)
Remittances from Russia to CIS Countries are Highly Correlated with Oil Price Movements
0
2
4
6
8
0
20
40
60
80
100
120
140
$ billions
Remittance outflows from Russia (left scale)
Crude oil price(right scale)
$/barrel
Source: IMF Balance of Payments and Development Prospects Group, World Bank.
$ billions $/barrel
Remittances Remain Resilient During Downturns in Host Countries
Remittances are sent by the stock (cumulated flows) of migrants
Remittances are a small part of migrants’ incomes that can be cushioned against income shocks by migrants
Duration of migration may increase in response to tighter border controls
Two opposing factors determine where savings are kept: migrants have higher confidence in the host country (“safe haven”) or in their home country (“home-bias”)
Fiscal stimulus packages (in public infrastructure) helps migrants in construction and services sectors
Crisis, Remittance and Economic Growth Decreasing employment opportunities in host countries,
lower remittances, and lower export demand put pressure on balance of payments in countries which rely on remittances
In turn, lower income and consumption reduce the GDP growth potential
Unfinished structural reforms and weak fiscal position at the beginning of the global economic crisis made the situation worse
As a result, CIS countries with large remittance/GDP ratios recorded a slowdown in GDP growth in 2009/10
Medium-term outlook is uncertain, recovery in EU is weak but growth in Russia is projected to remain robust
Growth is to Some Extent Correlated With Changes in Remittance Inflows
Armen
ia
Azerbaij
an
Belaru
s
Georgi
a
Kazakh
stan
Kyrgyz
R
MoldovaRussi
a
Tajik
istan
Ukraine
-20.0
0.0
20.0
40.0
60.0
80.0
100.0
Remittances (change in %) 2008 GDP (change in %) 2008
Armen
ia
Azerbaij
an
Belaru
s
Georgi
a
Kazakh
stan
Kyrgyz
R
MoldovaRussi
a
Tajik
istan
Ukraine
-40.0-30.0-20.0-10.0
0.010.020.030.040.050.0
Remittances (change in %) 2009 GDP (change in %) 2009
Armen
ia
Azerbaij
an
Belaru
s
Georgi
a
Kazakh
stan
Kyrgyz
R
MoldovaRussi
a
Tajik
istan
Ukraine
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Remittances (change in %) 2007 GDP (change in %) 2007
Armen
ia
Azerbaij
an
Belaru
s
Georgi
a
Kazakh
stan
Kyrgyz
R
MoldovaRussi
a
Tajik
istan
Ukraine
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Remittances (change in %) 2010 GDP (change in %) 2010
Remittance have multiple effects on economy: monetary, fiscal, and social
Remittances affect exchange rate, financial sector, fiscal revenue
Migration has implications on labor market, poverty as well as social implications
Understanding the linkages between remittances and other economic variables are important for policy makers:
In making economic projections In defining policies that maximize the impact on
economic development
Data and other resources are available at:
www.worldbank.org/eca/migration
www.worldbank.org/prospects/migrationandremittances
http://peoplemove.worldbank.org
www.mirpal.org