The Importance of Migration and Remittances for Countries of Europe - - PowerPoint PPT Presentation

The Importance of Migration and Remittances for Countries of Europe and Central Asia

Sudharshan Canagarajah MIRPAL 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

• pportunities 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

0% 5% 10% 15% 20% 25% 30% 35%

Remittances as share of GDP, 2010 (%)

20 40 60 80 100 120 140 160 180 200 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011e

$ 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)

• 5 000

10 000 15 000 20 000 25 000 30 000 35 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e

Russia Other CIS EU-10 Balkans Turkey 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

• 1 000

2 000 3 000 4 000 5 000 6 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e

Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz R Moldova Tajikistan Ukraine Remittance inflows (in USD million)

Remittances from Russia to CIS Countries are Highly Correlated with Oil Price Movements

2 4 6 8

2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 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

• n 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

• 20,0

0,0 20,0 40,0 60,0 80,0 100,0 Remittances (change in %) 2008 GDP (change in %) 2008

• 40,0
• 30,0
• 20,0
• 10,0

0,0 10,0 20,0 30,0 40,0 Remittances (change in %) 2009 GDP (change in %) 2009 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 Remittances (change in %) 2007 GDP (change in %) 2007

• 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

• ther 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