International Remittances Flow in ECA

In 2009, officially recorded remittances to the ECA region amounted to over USD 50 billion, 20% less than a year earlier. In the total volume of world remittances, ECA transfers have a 12% share and constitute 16% of remittances received by developing countries.

Many of the world’s largest recipients of international remittances (as a % of GDP) are found in countries of the former Soviet Union, particularly in the low-income economies of the Commonwealth of Independent States (CIS). Remittances measured as a percentage of GDP constitute 35% of GDP in Tajikistan, 22% in Moldova, and the Kyrgyz Republic.

For many ECA countries, remittances are the second most important source of external financing after foreign direct investment. In all CIS countries, remittance flows exceed official development assistance (ODA) by several multiples and contribute significantly to export financing. For many of the poorest countries in the region, they are the largest source of outside income and have served as a cushion against the economic and political turbulence brought about by transition.
The situation is substantially different in the new European Union (EU) member countries (EU-8). Income levels are higher, cross-country income differentials are lower, and there is less need for workers living abroad to support their families’ consumption. Moreover, the current and improving opportunities at home mean that there can be large gains from accumulating human and financial capital abroad, although as the economic situation at home improves, the incentives to migrate may themselves decrease.

Remittances inflow in ECA countries (as a % of GDP) in 2009

Total value of remittances inflow in ECA countries in 2009 (USD million)

Nowhere has the crisis has been more visible than in the flows of remittances. In 2009 remittances dramatically decreased in all regions of the world although the drop in the flows seems to be most pronounced in the ECA region.

Remittances inflow (annual percent change) in the regions of the world

Remittances to the ECA countries have fallen 20% percent since the global financial crisis hit and since then there is slow growth of remittances (4%) in 2010. While the decline was very deep and sudden, the recovery is slow and mild.

Migrants are not returning to their countries of origin, preferring to remain abroad and cut their living costs. In their countries of origin, the households they left behind are facing more difficult times.

In the EU the biggest drop in money transfers have been noted in Romania which is not typically associated with remittances (they constitute about 4.5% of GDP) followed by Moldova and Central Asia. For some countries such as Tajikistan this drop means a major channel of economic crisis and slowdown.

Total outflows of workers' remittances from the EU reached 29.6 billion EUR in 2009 - an increase of 3% compared to 2004 - mainly due to a big increase in extra-EU remittances. While extra-EU remittances increased by 87%, from 11.5 billion EUR in 2004 to 21.5 billion EUR in 2009, intra-EU remittances in the same period increased by only 3%. The EU data on remittances show that the negative trend in overall remittances that began at the end of 2007 was over by the second half of 2009 in most EU countries.