bne IntelliNews -
Remittances to Commonwealth of Independent States (CIS) countries from migrants working in Russia fell 4.99% y/y in the first half of 2014 because of a weakening Russian economy and ruble, according to the latest figures published by the Central Bank of Russia.
Moldova experienced the largest drop of inward remittances from Russia, with inflows down 18.9% y/y to $779mn. Uzbekistan, which receives the largest share of remittances from Russia among CIS countries, experienced inflows down 13% y/y to $2.8bn. Ukraine and Tajikistan faced steep drops too, with inward remittances down, respectively, 11.46% y/y to $1.56bn and 4.48% y/y to $1.56bn.
CIS countries are among the world's most dependent countries on remittances. Remittances, mostly from Russia, make up 42.1% of the GDP of Tajikistan, 31.5% of Kyrgyzstan's, 24.9% of Moldova's, 21% of Armenia's, according to World Bank figures.
“Weaker [Russian] growth will lessen job opportunities for migrant workers from ECA (Eastern European and Central Asian) countries. The strong depreciation of the ruble against the US dollar will further reduce the value of remittances measured in US dollars. Due to the embargo, food prices in ECA countries are expected to rise, hurting lower-income groups disproportionately, and lowering the amounts migrants will be able to send home,” the World Bank wrote in a report on remittances published in October.
Hit by Western sanctions and falling oil prices, the Russian economy posted 0.3% y/y GDP growth in 3Q14, the lowest quarterly pace since 2009. The ruble has lost 34.6% against the US dollar year-to-date.
On the other hand, some CIS countries had higher inward remittances from Russia despite the current troubles of the Russian economy. Remittances to Kyrgyzstan grew 6.68% y/y to $990mn in the first half of the year. Remittances to Armenia and Azerbaijan grew by, respectively, 19% y/y to $776mn and 14.82% y/y to $643mn in the period.
“Outward remittances from Russia to ECA developing countries are also affected by crude oil prices: remittances increased with oil prices from 2005 to 2008, and then dropped substantially when the oil price fell from over US$120 to nearly US$40 in the third quarter of 2008. Since then, remittances have climbed again, but remain more volatile than oil prices,” the World Bank wrote in its report.
Oil prices as measured by West Texas Intermediate (WTI) futures traded in New York and Chicago have fallen below $65 per barrel from over $100 per barrel over the last six months because of increasing competition of shale oil produced in the US and Saudi Arabia's refusal to endorse a production cut proposed by other members of the Organization of the Petroleum Exporting Countries (OPEC) cartel. Such a drop in oil prices, which 1H14 figures do not reflect yet, will inevitably further affect the flow of remittances from Russia to CIS and Eastern European countries.
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