Living here in comparatively wealthy Prague in the comparatively wealthy Czech Republic, with one of the lowest income differentials in Europe, one can easily forget how important remittances are to so many people in TOL’s coverage region. But a report published earlier this month by Euromonitor, a market research company, show how these payments remain crucial for millions of people throughout the continent. Luckily for them, one of the report’s main conclusions is that remittance inflows to the region, which declined drastically between 2008 and 2010 (16.6 percent from a peak of $57 billion), seem to be on the rebound.

The tendency in Central Europe is to think of Ukrainians, Moldovans, and others working here in construction or the service sector, so such a drop would simply be a result of the financial crisis in these parts and Western Europe. Yet the economic situation in Russia has had a huge influence on those numbers, as the report points out:

Russia is a top source of remittances for many Eastern European countries, particularly Ukraine. However, its economy contracted by 8.0% in real terms in 2009 and unemployment reached 8.4% of the economically active population in the same year, reducing employment opportunities for migrants. In addition, earnings sent home in the form of remittances declined in value, as the rouble declined from RUB24.9 per US$ in 2008 to RUB30.4 per US$ in 2010. Although GDP grew by 4.0% in real terms in 2010, the ability of migrant workers to send remittances might not reach pre-crisis levels for several years.

That “might not reach pre-crisis levels” is a recurrent theme elsewhere: “In 2010, remittances inflows to the Eastern European region began recovering as host economies began emerging from the recession, although not yet reaching pre-crisis levels. Total inflows into the region in 2010 reached US$47.6 billion, compared to US$57.0 billion in 2008 and US$46.3 billion in 2009.” Still, at least a little optimism is better than nothing.

Lastly, a few interesting points here:

Remittance inflows contribute different shares to the economies of the Eastern European countries. While remittances contributed 1.6% of the region’s total GDP in 2010, their share is the highest in Moldova (24.8% of GDP) and Serbia (14.8% of total GDP) and lowest in Russia (0.4% of GDP). However, at US$5.6 billion in 2010, inflows of remittances to Russia are the second-highest in the region, behind Poland (US$9.1 billion in 2010).

Though the share of GDP in Russia is minuscule, that’s still a lot of money that Russians abroad are sending home. And though we all know the stereotypical stories of the Polish plumbers and other workers around (and it is a big country), that figure of over $9 billion is still striking, especially since the Polish economy is actually one of the few in the EU that remains in relatively good shape.

For more on the value of remittances to the region, see a Transitions Online editorial from a few months back that pointed that external aid and the bailout packages from the likes of the IMF to poor European countries pale in comparison to the amount of money being sent home. As we argued at the time:

Consider how much worse off the poorest countries in Europe and Central Asia might be if the stream of migrants and the reverse flow of money were to slow. As the EU debates whether to make entry more difficult again after spending years painstakingly removing internal borders, policy-makers should keep this in mind, especially as the world’s rich nations are failing to meet their commitments to increase foreign aid spending.

Photo of returning Polish migrant worker is by Michal Garapich and appeared on the webpages for “Class and Ethnicity: Polish Migrant Workers in London,” a research project at the University of Surrey.

Jeremy Druker

Jeremy Druker is the executive director and editor in chief of Transitions Online. Twitter: @JeremyDruker Email: jeremy.druker@tol.org

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