The Global Economic Crisis, Migration, and Remittance Flows to Armenia: Implications for Poverty

Europe and Central Asia Region, The World Bank

The Global Economic Crisis, Migration, and Remittance Flows to Armenia: Implications for Poverty

International Conference on MigrationYerevan, ArmeniaJune 24-25, 2010

Europe and Central Asia Region, The World Bank

Armenia was one of the hardest hit countries by the 2008-09 global economic crisis

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The impact of the crisis was most severe on the construction sector

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The main transmission channels of the global economic crisis

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Impact on Household

Wealth

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The crisis affected all income groups more broadly

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Armenia avoided substantial potential increase in poverty during the crisis

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Reason #1 for avoiding worse outcomes: Public mitigation response measures

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More Households Relied on Government Support than other Coping Strategies

Poverty reducing impact of the public transfers increased

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Reason #3: Households’ own coping strategies

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Reason #3: Resilience of remittance flows, particularly those from non-migrant resources, and high incidence of

remittances among the poor

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Who benefits from migration and remittances? International Experience

Individuals and Families:As migrants tend to come typically from non-poor

households, direct beneficiaries are lower-middle to middle-income families

The poor could benefit from remittances mainly in subsequent rounds via multiplier effects

Local EconomyIncreased consumption and investment spending.

National EconomyLarge share of GDPSource of foreign exchange

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Migration, remittances and poverty impact

Migration:Why do people migrate (within or outside home country)Where are the destinations?What are their main economic activities at the

destination?What are the characteristics of migrants (origin,

education, age, gender, etc.) Remittance flows:

Sources, sizeTo whom they accruePoverty Impact

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After a steady increase, migrant workers abroad decreased in 2009 …

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….but internal migration surged, particularly out of Yerevan

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Construction is the main sector of employment for Armenia’s migrants abroad (2009)

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Migrants have similar education profile and are predominantly men

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Russia is the destination for most Armenian migrant laborers

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The share of migrants to Russia decreased; to Yerevan and marzs increased during the crisis

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Receipts of non-migrant remittances increased; those from migrants decreased

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Amount of remittance flows decreased overall (9%), but increased for non-migrant households (15%).

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All Households

Households Receiving Remittances

All Migrant Non-migrant2005 6,175 31,475

49,118 25,394

2006 6,431 34,914 50,774 26,909 2007 9,033 4,428

65,338 32,860

2008 10,147 47,387 63,587

35,297

2009 9,217 46,605 61,240 40,679 Change (2008-09) -9% -2% -4% +15%

(AMD per household per month)

Migrant remittances larger than non-migrant remittances, but less frequent

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Official remittances declined by over $330 million (or 31 percent)

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In the absence of remittances, poverty incidence would be considerably higher

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Importance of remittance increased during the crisis, esp. in Yerevan

Europe and Central Asia Region, The World BankHuge poverty reduction impact among

remittance recipients (poverty continued to decline despite the crisis)

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Remittances do appear to be going to some of the most vulnerable households in Armenia!

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Remittance receiving households tend to have lower labor or other earnings

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Source of Income

Households Not Receiving

Remittances

Households Receiving

Remittances(a) (b) (b/a) (%)

Wage 77,018 28,419 37Self

employment 6,149 2,703 44

Pension 19,886 14,043 71Family Benefit 3,112 2,795 90

Agriculture 5,168 1,612 31

(AMD per household per month)

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…but households receiving remittances do spend more on education, health and other goods and services

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Source of Income

Households Not Receiving

Remittances

Households Receiving

Remittances

(a) (b) (b/a) (%)

Health 7,957 10,011 126

Education 3,269 5,593 171

Household Goods

7,413 7,650 103

Durables 10,493

10,849 103

Clothing 4,396 5,909 134

(AMD per household per month)

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Remittance receiving households have higher rate of saving, esp. in rural areas

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Summary and final remarks

There was appreciable decline in external migration, and increase in both internal and external return migrationMost are destined to Russia (80%) and mainly engaged in

the construction sector (85%) Although decreased, remittance flows remained

relatively more resilient A significantly larger share of households receive

remittances (>60%) from individuals outside of the immediate familyIncidence of non-migrant remittances increased during the

crisis…but the amount of non-migrant remittances are smaller

than migrant remittances

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Summary and final remarks (2)

Remittances play an important role in poverty reduction and accrue to some of the poorest and most vulnerable householdsHuge poverty reduction impact on recipientsHigher rate of savingsMore spending on education, health and other goods and

services

…but there is evidence that remittance flows may discourage labor supplyRemittance recipient households borrow less