The latest data on remittances confirm what we predicted in our previous analysis: the bifurcated trend in remittance growth between countries in the former Soviet Union and in Europe in 2010 continued throughout 2011. Preliminary 2011 dollar remittance estimates for Bulgaria, Serbia and Turkey show significantly lower growth in 2011 compared to the over 20 percent growth rates reported in Armenia, Kyrgyzstan and Tajikistan.
Growth rates for remittances originating from Europe are even lower if calculated using euro instead of dollar remittances. Fluctuations in the euro / dollar exchange rate distorted growth rates, further confirming our results.
As explained in our latest analysis on remittances, the reason for the difference in growing rates of remittance inflows in the region is the country where migrants are sending money from: migrant workers in our region are primarily in Russia and the European Union (EU) – with the majority of migrant workers from countries in the former Soviet Union countries working in Russia.
While remittance outflows from Russia grew by about 24 percent in the first three quarters of 2011, remittances from EU countries – where 2011 data is available – grew on average by less than eight percent in the corresponding period. The latest data from the German Bundesbank confirms this trend: euro remittance outflows from Germany in 2011 declined by about one per cent in comparison with 2010.
The future doesn’t look good for migrant workers
The still unresolved debt crisis in Europe doesn’t point to a positive scenario for migrant workers who are currently working or planning to move to the eurozone in 2012.
Most countries popular amongst migrants are entering years of austerity and public spending cuts; overall economic growth prospects in the eurozone are grim, and not likely to improve throughout the year. How strongly this would affect the demand for migrant labour is hard to tell and the impact on the volume of future remittances is not easy to predict.
Migrant labour supply is more elastic than national labour supply; and very often migrants work in the informal sector, and are rarely included in official statistics.
So far the 2011 trend is not reassuring. Should the situation worsen in 2012, remittance-receiving households will not only be negatively affected by the repercussions of the eurozone debt crisis on their countries’ economies, but would also see a reduction of support coming from the EU in the form of remittances.
For Russia the situation looks more promising. However, the risk is higher as remittances sent from Russia to the poorest countries in Central Asia are larger compared to the size of their economies than in the rest of the region. Should the positive economic performance of 2011 – sustained by high oil and gas prices – reverse in 2012 and translate into a decline in remittance outflows, the conditions of poor households in Central Asia might suddenly deteriorate.
* Source: Balance-of-payments data, reflecting entries for “workers’ remittances” and “compensation of employees.” Data for Uzbekistan are reported by the Central Bank of Russia as remittance outflows sent via money transfer agencies from Russia to Uzbekistan. Ukraine data are from the National Bank of Ukraine. Data up to Q3 2011; Data for Serbia are only available for the period January-November 2011.