The Kazakh economy became an early victim of the crisis because it is highly integrated into the global financial system. A rapid decline in remittances from Kazakhstan began in early 2008. In mid-2009 this decline slowed down, but in the third quarter of that year remittances were again 22% down compared to the same period of the previous year, and since then the negative trend has resumed. Until the second quarter of 2010, remittances were declining by 20% per quarter on average. A breakthrough came in the third quarter of 2010, when remittances shot up by 50%. A similar, albeit less dramatic pattern was observed in remittances made by Kazakh migrant workers, most of whom work in Kyrgyzstan and Uzbekistan.
The dynamics of remittances received by Moldova, Tajikistan and Armenia were fairly similar: rapid growth until the end of 2008, a decline in 2009 with the lowest point in the 2nd-3rd quarters, and an upward trend after the
third quarter of 2010. There is a direct correlation between the changes in remittances paid from Russia and the remittances received by the three countries mentioned above. Kyrgyzstan, an economy that is strongly oriented towards Kazakhstan, also suffered a 20% decline in remittances at the end
of 20094. All these states belong to the group of CIS economies discussed
above, which were the most dependent on migrants’ remittances in the pre- crisis period.
We are able to study remittances by migrants working in Russia in more detail by using data from various express payment companies (Pochta Rossii, Western Union, Contact, Migom, Unistream, and others). Although these data sources do not include cash carried by migrants themselves and various informal or semi-formal methods of transfer, it enables us to analyse the regional structure of remittances.
The current leaders in terms of remittances received through payment systems are Uzbekistan (25% of total remittances, or just over $2 billion in the first three quarters of 2010), Tajikistan (19% or $1.58 billion) and Ukraine (13% or $1.27 billion). These three countries have been the recipients of the largest sums since the pre-crisis period, but then Ukraine’s share increased to 25%.
The average quarterly growth of remittances made through payment systems in the CIS before the crisis was sometimes as much as 70%. The highest growth rates were recorded in remittances to Ukraine and Uzbekistan; these countries were also in the lead in absolute terms. Remittances by migrants from Moldova were also increasing rapidly. As a rule, payments to workers (and, accordingly, remittances) peaked during the 3rd and 4th quarters of each
year, and the lowest total payments were recorded in the first quarter (i.e. when most construction work is suspended until spring). These trends are clear in data from previous years. Therefore, the sharp decline in remittances to all CIS countries in the first quarter of 2009 was attributable both to the seasonal factor and to recession. This decline was unprecedented: even taking into account salary cuts in the first quarter, remittances to CIS countries totaled less than 70% of the same period of the previous year.
The different speeds at which remittances fell in response to the crisis can be explained by the employment specialisation of the migrants themselves. Migrants from Moldova who work mainly in construction were the first to be affected by recession in Russia and reduced their remittances in early 2009 (this was reflected in Moldova’s balance of payments). By autumn of 2009, decreases in migrants’ remittances from Russia were recorded in Ukraine, Armenia and Azerbaijan. The most dramatic decrease in remittances through payment systems was recorded in Ukraine: in the third quarter of 2009, the remittances totaled only one-third of the previous year’s figure, but the situation stabilised somewhat in the fourth quarter. Tajikistan’s dynamics was better in comparison with other economies that are heavily dependent
EDB Eurasian Integration Yearbook 2011
Table 4.3.
of the previous year)
Central Bank of Russia.
Pochta Rossii 2008 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 Total 170 117 167 123 155 117 111 99 69 74 69 70 68 70 86 80 129 103 128 101 130 102 Remote countries 144 112 153 117 125 104 100 98 65 78 69 76 88 85 155 67 217 80 211 79 191 78 CIS countries 174 119 168 124 158 118 112 100 69 75 69 70 66 69 80 78 119 100 120 99 125 101 Azerbaijan 169 68 167 96 155 86 106 69 68 126 52 120 53 113 68 142 108 106 123 95 117 97 Armenia 149 123 147 125 141 121 109 102 75 42 65 68 65 67 75 72 99 169 112 96 122 99 Belarus 150 125 156 133 156 129 113 108 86 86 92 87 89 82 112 97 156 126 139 109 192 159 Georgia 139 118 133 122 118 124 109 111 70 83 70 77 77 74 - - - - Kazakhstan 157 131 181 147 160 133 115 104 75 81 73 75 86 87 107 104 167 142 150 134 156 134 Kyrgyzstan 171 190 145 116 148 120 111 107 70 55 107 48 97 46 110 43 167 82 120 100 120 97 Moldova 175 117 182 157 155 154 121 134 55 112 67 71 63 72 77 80 125 66 105 98 116 103 Tajikistan 166 87 141 133 128 126 92 96 69 72 88 66 114 67 118 89 141 106 131 94 132 95 Turkmenistan 160 123 200 137 188 131 120 115 75 93 67 84 67 82 83 88 117 105 100 98 100 102 Uzbekistan 216 105 181 116 166 108 112 93 71 72 79 86 76 85 95 95 140 127 134 99 142 104 Ukraine 185 180 212 123 195 119 127 102 71 80 45 58 33 56 58 62 111 79 140 113 135 111
on remittances: after a decline in the first quarter of 2009, pre-crisis levels were restored in the middle of the year. This can be explained by the fact that Tajik migrant workers were very numerous and many of them were employed in utilities and sales (i.e. sectors which were least affected by the crisis) or had poorly paid jobs, which locals were unwilling to take. Remittances from Russia to Belarus also remained stable, but these were made mainly by citizens rather than migrant workers. Most CIS countries (especially in Central Asia) saw a noticeable increase in remittances in the first three quarters of 2010, but this growth should be viewed as a “catch-up” after the preceding decline. Another indicator of the impact of the crisis on migrant workers is the change in average transaction amounts. Salary cuts resulted in a decrease in the average transaction amount from $800 in early 2008 to $450 in the first quarter of 2009. By the third quarter of 2010 the figure had increased to $530. At the peak of the crisis the average transaction amount dropped most significantly in remittances to Kyrgyzstan, Armenia and Ukraine. That is, workers from these countries were most affected by the decline in demand for labour in Russia. The volatility of this indicator (there were fluctuations throughout 2009 and the first half of 2010) suggests that the negative consequences of the crisis are still being played out.
Before the crisis migrants’ remittances stimulated consumer demand and, to some extent, investment in recipient countries, and the crisis reversed this trend. Retail turnover was stagnant in Armenia and Kyrgyzstan in 2009, and dropped by 5% in Moldova and by 17% in Ukraine. Significant increases in demand were observed in Tajikistan and Uzbekistan only, where retail turnover increased by 13% and 17% respectively5. Armenia saw a 50% decrease
in construction (Sberbank’s Centre for Macroeconomic Studies, 2010), which had previously been financed mainly by migrants’ remittances. Despite generally favourable macroeconomic dynamics in Uzbekistan, EBRD experts observed the negative impact of the decline in remittances from Russia and Kazakhstan on the country’s economy (EBRD, 2010).
The ratio of migrants’ remittances to recipient countries’ GDP also declined during the crisis (see Table 4.4). In the first half of 2009, i.e., during the most
5 Data from the CIS Interstate Statistics Committee.
Table 4.4.
Ratio of remittances received to GDP (in %) Source: Calculated based on data from the central banks of Armenia, Kyrgyzstan, Moldova, Tajikistan and Ukraine and the IMF 2007 2008 2009 Armenia 11.1 10.6 10.5 Kyrgyzstan 26.8 28.8 26.4 Moldova 29.5 28.9 24.5 Tajikistan 48.3 52.7 37.4 Ukraine 2.9 2.3 2.9
acute phase of the crisis, remittances to Moldova accounted for 19.5% of the country’s GDP (compared to 29% in 2007), and by the end of the year they accounted for 24%. In Tajikistan this index declined during the two crisis years (2008-2009) from 48% to 37%. In other words, remittances in US dollars were declining faster than GDP. This index showed smoother dynamics in Armenia, Kyrgyzstan and Ukraine.
***
Migrants’ remittances act as a major channel of secondary spread of the crisis in the post-Soviet space. This channel was especially significant for traditional labour-donating countries. Production declined dramatically in Russia and Kazakhstan, as these countries were directly affected by the crisis through the foreign trade channel and were highly integrated into the global financial system. The crisis led to mass staff and salary cuts and delays in payment, which in turn triggered an outflow of migrant workers. Severe unemployment in CIS countries was attributable to two factors: staff cuts, which were directly caused by the crisis and subsequent decline in demand, and the return of migrant workers from abroad. This situation, coupled with the deteriorating living standards of migrants’ families, has the potential to increase social tension.
Migrants’ remittances turned out to be highly sensitive to the decline in production in Russia and were a significant factor in negative economic developments in the recipient countries. The importance of these remittances for individual CIS countries enables us to conclude that the regional component of the crisis has played a decisive role in these countries, especially in Tajikistan and Moldova.
Despite the recovery in production in Russia’s legitimate economy, remittances by labour migrants remain at a relatively low level. This can be explained by the difficulties migrants face getting back the jobs they had before the crisis. In addition, crisis salary levels persist. Thus, this channel of interaction between states appears to be less fluid than, for example, the foreign trade channel: positive post-crisis developments are channelled through it indirectly and with a long time lag.
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