In 2006, before the crisis took hold, Russia was the fifth largest source of migrant workers’ remittances ($11.4 billion annually) (Mohapatra, Ratha, 2010) after the US, Saudi Arabia, Switzerland and Germany. Despite a dramatic decline in remittances in 2009, Russia moved to fourth position ($18.6 billion). Russia receives $5.6 billion annually in migrants’ remittances from other countries.
2 Data from the website of the Russian Ministry of Health and Social Development (www.
According to the World Bank, global remittances totalled $316 billion in 2009, which represents a 6% decrease compared to the previous year ($307 billion of the total was sent to developing countries). The World Bank forecasts that migrant labour remittances will total $335 billion in late 2010 (remittances made up a total of $325 billion by November 2010), which is nearly the same as in 2008 (Ratha, Sirkeci, 2010). A 7.1% increase in global remittances is forecast in 2011. It should be remembered, however, that this growth is from a low starting point. Even if these growth rates are sustained, they should not be expected to reach pre-crisis levels any time soon.
Globally, the dynamics of remittances during the crisis resembled that of other financial flows, but were somewhat more stable. According to World Bank experts, this is due to the huge number of migrant workers and the fact that migrants send their families only a small part of their income and continue to do so even when their earnings fall (Mohapatra, Ratha, 2010). It is thought that during a crisis or natural disaster, migrants strive to send their families as much as they can. However, the latter statement does not accurately describe the situation in the CIS region. The extremely low living standards of migrant workers in Russia and Kazakhstan allowed them to subsist on negligible sums and send nearly all their earnings to their home countries.
The dynamics of remittances largely correlated with fluctuations in the Russian economy, and permeable borders enabled the effects of the crisis to spread swiftly through the migrants’ remittances channel. But the converse is also true: economic recovery in Russia resulted in an increase in remittances, although this growth lagged behind the growth in industrial production.
Remittances from Russia to other post-Soviet countries are also unique in their sensitivity to fluctuations in world energy prices. It may seem obvious in view of the large proportion of oil and gas in Russia’s export structure, but this correlation is much weaker in the Gulf states where migrants play an even greater role in the economy. One possible explanation is fluctuations in the exchange rate in the pre-crisis period (Golovnin, Ushkalova, 2011). The collapse of world energy prices coincided with a significant devaluation of CIS countries’ currencies. The impact of the rouble exchange rate on remittances manifested itself in a decline in dollar-denominated remittances which was more dramatic than had been anticipated.
Remittances quickly react to the worsening crisis in labour-recipient economies, and any decline in remittances in turn impacts strongly on labour-donating economies. Donor economies are highly exposed to external shocks, and remittances from abroad function as a stabilising buffer against these. The economic contribution of these remittances was remarkable before the crisis. In 2007, for example, remittances accounted for 48% of
GDP in Tajikistan, 29% in Moldova and 27% in Kyrgyzstan3. These three
countries were included in the World Bank’s list of most remittance- dependent countries, based on a threshold of 25% of GDP. Armenia and Uzbekistan are also highly dependent on remittances. Although Uzbekistan does not supply any official statistics in this area, there are grounds for estimating its dependence at 13% of GDP (International Crisis Group, 2010). These statistics go hand in hand with the fact that the Russian and Kazakh economies are highly dependent on migrant workers from CIS countries who dominate certain sectors such as construction.
Migrants’ remittances have the potential to stimulate individual sectors of national economies and boost investment and production. On the other hand, this money can also trigger inflation. The mutual interdependence between labour donating and recipient economies manifests itself in the instant spread of negative and positive movement; even before the crisis, the increase in remittances to Central Asian countries helped to fuel inflation as people’s increasing buying power led to higher prices. Domestically produced goods were replaced by cheaper Russian and Chinese products, shown by the dramatic increase in import figures in the pre-crisis period.
Before the crisis, the annual growth in remittances in the post-Soviet space averaged 25-35% (Kommersant-Dengi, April 13, 2009). Owing to a lack of data, however, no definitive quantitative assessment can be made. The Current Transfers item of the CIS countries’ balance of payments can be said to present reasonably accurate picture of remittance dynamics.
At the peak of the first wave of the crisis in late 2008, remittances stopped increasing and in some countries, e.g. Tajikistan, incoming remittances started to decline (Vinokurov, 2009). In 2009, remittances fell throughout the CIS by about 25%, according to the World Bank, and were at their lowest in the second quarter of that year.
Interestingly, the decline in production in the formal sector of the Russian economy was stemmed in the autumn of 2009, but the disproportionate decline in remittances from this country continued. In the first three quarters of 2010 remittances increased, particularly those of migrant workers, but they still fall short of absolute pre-crisis figures. The crisis strained many existing links between post-Soviet countries, as is illustrated by the fact that payments from Russia to CIS countries recover at a slower rate (a lag of 5-10 percentage points) than payments to remote countries.
At the end of 2010 total remittances began to approach pre-crisis levels, but these pre-crisis figures are yet to be achieved (see Table 4.2).
3 According to the balance of payments figures presented by respective national statistics
Table 4.2.
Rate of growth (decline) in remittances (as % of the same period of the previous year) Source: balance of payments of Russia, Kazakhstan, Armenia, Moldova and Tajikistan (based on respective central bank data) 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Paid Russia 150 135 121 89 82 68 77 94 111 128 118
Migrant workers’ remittances 135 129 105 74 70 70 83 103 113 110 111
Russia, paid to CIS countries 142 135 113 81 78 71 78 95 97 108 112
Migrant workers’ remittances to CIS countries
138 133 106 74 69 70 80 98 104 103 108
Kazakhstan 86 53 63 77 73 104 78 85 79 81 153
Migrant workers’ remittances 82 52 62 76 74 102 79 88 80 83 134
Received
Armenia 126 123 134 105 77 67 67 79 119 78 -
Moldova 152 157 143 104 69 76 68 91 105 99 153
Migrant workers’ remittances 135 136 132 100 58 57 57 72 104 109 134
Moldova, received from Russia 291 201 173 105 89 89 74 101 115 107 143
Migrant workers’ remittances from Russia
181 170 192 118 119 71 68 86 113 139 134
Tajikistan 164 184 162 113 75 62 64 79 115 – –
Ukraine 107 114 107 79 89 75 74 97 99 114 193
Migrant workers’ remittances 109 106 94 73 82 70 70 88 80 101 196