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After Record Year, Migrant Remittances 'To Fall 5-8 Percent' In 2009

Georgian migrants on a bus in Munich, Germany.
2008 was the year that financial meltdown plunged the global economy into a deep downturn.

But for migrant remittances, it was actually a bumper period.

A new report by the UN's Conference on Trade and Development says workers sent home a record $305 billion in cash -- up nearly 9 percent on the previous year.

That's partly because the economic decline started too late to affect full-year results, according to Detlef Kotte, one of the report's authors.

Kotte says another reason was the huge increases for two of the largest recipients, India and Bangladesh. Their migrant workers are concentrated in Gulf states that benefited from high oil prices until halfway through the year.

But 2008 also marked the likely end of an eight-year spurt of growth in remittances.

Already that growth had slowed, from a whopping 22.7 percent in 2007.

In The Pipeline

The report says that this year, remittances are likely to drop by 5-8 percent.

For Europe and Central Asia, the figure is more than 10 percent, the sharpest drop of any region.

"The main receivers of workers' remittances [in this region] are Ukraine, Russia," Kotte says.

But he adds that "in terms of importance for the national economy," Tajikistan has 34 percent of its gross domestic product in workers' remittances, Moldova more than 25 percent, and countries like Kyrgyzstan whose remittances exceed 10 percent of their GDP.

"These countries will be the first to be affected," Kotte says.

An event to feed unemployed migrant workers of Moscow's shuttered Cherkizovsky Market was broken up by police in July.
Kotte says the recession has eaten into remittances because of the sharp contractions in sectors where migrants typically find jobs -- like construction and services -- and because others are discouraged from going abroad in search of work.

Normally, he says, those who are already abroad tend to send more money when times are especially hard at home; but not this year.

"The crisis is global and the countries from where remittances are transferred even have greater macroeconomic difficulties than many of the countries that are receiving the remittances, so it's kind of an unusual picture," Kotte says. "Normally remittances make up for losses of national income, but this is not the case. This is also maybe one of the reasons why in 2008 we still see an increase, but this cannot be sustained in 2009."

No Early Revival

Kotte says remittances should begin to pick up in 2010 as the expected economic recovery takes hold.

But any pick-up could be slow because economic recovery is still expected to be sluggish. Moreover, joblessness is likely to continue rising even as economies pull out of recession.

"It would be a bit optimistic to expect 2010 to be a year of very fast growing workers' remittances given that domestic unemployment has risen in these countries and given that there's a tendency, in the context of overall deflation, for wages to decline," Kotte says. "So in 2010 there will probably be a continuation of a crisis in workers' remittances."