European Department

THE REFUGEE SURGE IN EUROPE:

ECONOMIC CHALLENGES

GLOBAL PARLIAMENTARY CONFERENCE

PRESENTER: ANTONIO SPILIMBERGO, IMF

April 11, 2016

European Department

CONTENTS Facts Numbers in Perspective Institutional Framework

Economic Impact Labor Market Fiscal Effects GDP Growth Age-Related Spending

Policies Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

2

European Department

REFUGEE CRISIS IN PERSPECTIVE

FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

3

0

500

1 000

1 500

2 000

2 500

3 000

2012 2013 2014 2015 2016

Jordan Lebanon

Turkey Egypt and Iraq

Syrian Refugees by Host Country

(In thousands, refugees registered with UNHCR)

Source: UNHCR Syria Regional Refugee Response.

European Department

ASYLUM APPLICATIONS IN THE EU OVER TIME

FACTS

FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

4

0

200

400

600

800

1 000

1 200

1 400 1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

EU-28: Asylum Applications (Thousands)

Source: Eurostat.

End of

the Cold

War Civil war in

Syria

Bosnia

and

Kosovo

Wars

European Department

SURGE IN MID-2015

Source: Eurostat.

Note: Numbers for 2016 are preliminary.

FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

5

10

30

50

70

90

110

130

150

170

190

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept. Oct. Nov. Dec.

2013

2014

2015

2016

First-Time Asylum Applicants (Thousands)

European Department

UNEVEN IMPACT ACROSS COUNTRIES

Source: Eurostat.

FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

6

0

2

4

6

8

10

12

14

16

18

20

0

200

400

600

800

1000

1200

1400

EU

-28

DEU

HU

N

SW

E

ITA

AU

T

FIN

DN

K

GR

C

MLT

Total applicants,

thousands

Applicants per 1,000

inhabitants (RHS)

Selected Asylum Seekers' Destinations

in the EU-28 (2015M1-M12)

0

20

40

60

80

100

120

140

160

180

200

0

200

400

600

800

1000

1200

1400

LB

N

IRN

JOR

IRQ

YM

N

EG

Y

SY

R

DZ

A

MR

T

LB

Y

Registered Refugees in MENA (As of Mid-2015)

Registered refugees,

thousands

Refugees per 1,000

inhabitants (RHS)

Source: UNHCR Mid-Year Trends

European Department

INTEGRATION IS DIFFICULT

0

2

4

6

8

10

12

14

16

18

20

-90% -80% -70% -60% -50% -40% -30% -20% -10% 0%

Nu

mb

er

of

est

imate

s

Wage gap

Source: IMF Staff Estimates

Note: Histogram of migrant wage gap, conditional on observables, based on 75 estimates across 9 studies on earnings

assimilation of immigrants in the US, Canada and Europe.

Immigrant Wage Gap: Distribution of Estimates in Select Studies FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in

Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

7

European Department

EFFECTS ON NATIVES

Migrants do not steal natives’ jobs • studies have documented small and short-lived effects

Why? • Migrants’ skills often complementary to those of natives • Change in product mix • Natives upgrade their skills in response to competition and

relocate to preserve their wages (which has a welfare cost)

FACTS

Labor Market

Fiscal Effects

Age-Related Spending

GDP Growth

ECONOMIC IMPACT

POLICIES

Numbers in

Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

8

European Department

ESTIMATED SHORT-TERM FISCAL EFFECT OF CURRENT REFUGEE WAVE

Fiscal Cost of Asylum Seekers, 2014-16

(Percent of GDP)

2014 2015 2016

Austria 0.08 0.16 0.31

France 0.05 0.05 0.06

Germany 0.08 0.20 0.35

Hungary 0.0 0.1 0.0

Italy 0.17 0.20 0.24

Spain 0.01 0.01 0.03

Sweden 0.3 0.5 1.0

GDP-weighted average 0.08 0.13 0.19

Source: IMF staff estimates based on authorities' information and/or other sources.

FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in

Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

9

European Department

GROWTH EFFECT POSITIVE, BUT UNEVEN

FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in

Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

0,0

0,1

0,2

0,3

0,4

0,5

0,6

2015 2016 2017 2018 2019 2020

Output Level (Percent)

EU scenario 1

EU scenario 2

DEU scenario 1

DEU scenario 2

Impact of Refugee Inflows (Deviation from baseline scenario)

Sources: IMF staff estimates.

-0,2

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8

2015 2016 2017 2018 2019 2020

Government Debt/GDP (Percentage point)

EU scenario 1

EU scenario 2

DEU scenario 1

DEU scenario 2

0,00

0,05

0,10

0,15

0,20

0,25

0,30

0,35

0,40

2015 2016 2017 2018 2019 2020

Unemployment Rate (Percentage point)

EU scenario 1

EU scenario 2

DEU scenario 1

DEU scenario 2

10

European Department

MIGRATION KEY FOR POPULATION GROWTH

-1

-0,5

0

0,5

1

1,5

2

2,5

3

3,5

4

1960 1970 1980 1990 2000 2010

Natural change

Net migration

EU28: Population Changes

(Millions)

FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in

Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

11

European Department

PENSION EFFECT LIKELY POSITIVE

Refugees younger than the average EU citizen Quantification: assume same inflow as in scenario 1

Pension expenditure would be lower than in the baseline EC Aging

Report scenario by some ¼ percent of EU GDP by 2030 Effects on health spending also favorable Heterogeneity across countries reflecting refugee distribution

FACTS

Labor Market

Fiscal Effects

GDP Growth

Age-Related Spending

ECONOMIC IMPACT

POLICIES

Numbers in

Perspective

Institutional Framework

Labor Markets

Product Markets

Housing and Mobility

Fiscal Policy

12

European Department

SUMMARY

Flows of displaced people are large by historical standards and may persist

The international experience is that the impact on native workers is likely limited

Faster labor market integration lowers costs and raises gains

Policies help, especially ALMP and labor and product market reforms

Fiscal costs are limited, and immigrants can help social security but will not solve it

13