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