Page 65 - BNE_magazine_06_2020 Growers

bne June 2020 Eurasia I 65
Slump in remittances to be twice as deep in CEE/Eurasia as during Great Recession
bne IntelIiNews
Global remittances are heading for the worst slump in recent history, with a decline of around 20% forecast this year, a new World Bank report says.
Sharp economic contractions brought on by the coronavirus (COVID-19) pandemic and lockdowns aimed at containing the spread of the virus are anticipated in many countries around the world, includ- ing in Central and Eastern Europe (CEE) and Eurasia, at least for the first half of this year. Migrant workers are particularly vulnerable to such economic crises in their host counties, points out the World Bank.
Globally, remittances to low and middle- income countries (LMICs) are projected to fall by 19.7% year on year to $445bn this year, according to the World Bank report COVID-19 Crisis through a migration lens.
The Europe and Central Asia region is forecast to face a considerably worse contraction than the global average, at -27.5% compared to 2019, with the value of remittance payments falling from $65bn in 2019 to $47bn in 2020, and only slightly recovering to an anticipated $49bn in 2021.
This contraction is almost twice as severe as the one seen in 2009, the peak of the last international economic and financial crisis, when remittances to the region fell by 14.7% y/y.
Given the ongoing crisis, this is particu- larly damaging for LMICs, which are set to lose out on other sources of external financing such as foreign direct invest- ment (FDI), which the World Bank expects to decline by over 35%.
The Europe and Central Asia region con- tains some of the world’s most remit- tance-dependent countries. In 2019, remittances equalled 29.2% of GDP in Kyrgyzstan, making it the most remit-
tance-dependent economy in the world. It was closely followed by neighbouring Tajikistan, where remittances accounted for 28.2% of the year’s GDP.
Elsewhere in the wider region, remit- tances are important contributors to the economy in Southeast European coun- tries Moldova (16.2%), Kosovo (15.6%), Bosnia & Herzegovina (10.2%) and Alba- nia (9.5%), as well as the South Caucasus – Georgia (14.2%) and Armenia (11.4%).
In absolute terms, Ukraine was the top recipient of remittances in the region, receiving almost $16bn in 2019.
This was a record high for the country, and a result of the rebound in economic activity in Russia. Russia is also a highly important source country for remittanc- es to Central Asia, the South Caucasus and Moldova.
However, in 2020 remittances from Russia have already dropped sharply as a consequence of both the pandemic and the slump in oil prices.
Many of the Tajik migrant workers whose remittances account for a signifi- cant amount of Tajikistan’s cash inflows have returned home over the past few
months due to coronavirus (COVID-19) driven recessions in the countries where they normally work, the Tajik economy ministry said on April 17.
“Azerbaijan, Kazakhstan and Russia, the region’s largest oil producers, are expect- ed to suffer budget shortfalls, mounting pressure on their currencies, and possible recessions. Notably, the high dependence on remittances from Russia is likely to increase the impact of negative external shocks on the Central Asian economies of the Kyrgyz Republic, Tajikistan and Uzbekistan,” says the report.
The World Bank also references the weaker ruble, which means that even before the onset of the crisis, remittances to Kyrgyzstan dropped by 9% y/y in dollar terms in January-February.
On top of the financial blow to migrant workers from the region, the report
also highlighted the precarious status
of workers from Central Asia, who were "stranded at various airports after Russia and other neighbouring countries closed borders and grounded flights to the Kyrgyz Republic, Uzbekistan and Tajikistan, forcing them to camp out at the terminals for weeks until the issue was resolved by their respective governments.”
Remittance inflows to Europe and Central Asia remained strong in 2019
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