Europe and Central Asia Region, The World Bank The Global Economic Crisis, Migration, and Remittance Flows to Armenia: Implications for Poverty International Conference on Migration Yerevan, Armenia June 24-25, 2010

Europe and Central Asia Region, The World Bank Armenia was one of the hardest hit countries by the global economic crisis 2

Europe and Central Asia Region, The World Bank The impact of the crisis was most severe on the construction sector 3

Europe and Central Asia Region, The World Bank The main transmission channels of the global economic crisis 4 Financial Markets Labor Markets Migration and Remittances Product Markets Government Services Global Economic Crisis Impact on Household Wealth

Europe and Central Asia Region, The World Bank The crisis affected all income groups more broadly 5

Europe and Central Asia Region, The World Bank Armenia avoided substantial potential increase in poverty during the crisis 6

Europe and Central Asia Region, The World Bank Reason #1 for avoiding worse outcomes: Public mitigation response measures 7 More Households Relied on Government Support than other Coping Strategies Poverty reducing impact of the public transfers increased

Europe and Central Asia Region, The World Bank Reason #3: Households’ own coping strategies 8

Europe and Central Asia Region, The World Bank Reason #3: Resilience of remittance flows, particularly those from non-migrant resources, and high incidence of remittances among the poor 9

Europe and Central Asia Region, The World Bank 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 Economy Increased consumption and investment spending.  National Economy Large share of GDP Source of foreign exchange

Europe and Central Asia Region, The World Bank 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, size To whom they accrue Poverty Impact 11

Europe and Central Asia Region, The World Bank After a steady increase, migrant workers abroad decreased in 2009 …

Europe and Central Asia Region, The World Bank ….but internal migration surged, particularly out of Yerevan

Europe and Central Asia Region, The World Bank Construction is the main sector of employment for Armenia’s migrants abroad (2009) 14

Europe and Central Asia Region, The World Bank Migrants have similar education profile and are predominantly men

Europe and Central Asia Region, The World Bank Russia is the destination for most Armenian migrant laborers

Europe and Central Asia Region, The World Bank The share of migrants to Russia decreased; to Yerevan and marzs increased during the crisis 17

Europe and Central Asia Region, The World Bank Receipts of non-migrant remittances increased; those from migrants decreased 18

Europe and Central Asia Region, The World Bank Amount of remittance flows decreased overall (9%), but increased for non-migrant households (15%). 19 All Households Households Receiving Remittances AllMigrantNon-migrant ,175 31,475 49,118 25, ,431 34,914 50,774 26, ,033 4,428 65,338 32, ,147 47,387 63,587 35, ,217 46,605 61,240 40,679 Change ( )-9%-2%-4%+15% (AMD per household per month) Migrant remittances larger than non-migrant remittances, but less frequent

Europe and Central Asia Region, The World Bank Official remittances declined by over $330 million (or 31 percent) 20

Europe and Central Asia Region, The World Bank In the absence of remittances, poverty incidence would be considerably higher 21 Importance of remittance increased during the crisis, esp. in Yerevan

Europe and Central Asia Region, The World Bank Huge poverty reduction impact among remittance recipients (poverty continued to decline despite the crisis) 22 Remittances do appear to be going to some of the most vulnerable households in Armenia!

Europe and Central Asia Region, The World Bank Remittance receiving households tend to have lower labor or other earnings 23 Source of Income Households Not Receiving Remittances Households Receiving Remittances (a)(b)(b/a) (%) Wage 77,018 28,41937 Self employment 6,149 2,70344 Pension 19,886 14,04371 Family Benefit 3,112 2,79590 Agriculture 5,168 1,61231 (AMD per household per month)

Europe and Central Asia Region, The World Bank …but households receiving remittances do spend more on education, health and other goods and services 24 Source of Income Households Not Receiving Remittances Households Receiving Remittances (a)(b)(b/a) (%) Health 7,957 10, Education 3,269 5, Household Goods 7,413 7, Durables 10,493 10, Clothing 4,3965, (AMD per household per month)

Europe and Central Asia Region, The World Bank Remittance receiving households have higher rate of saving, esp. in rural areas 25

Europe and Central Asia Region, The World Bank Summary and final remarks  There was appreciable decline in external migration, and increase in both internal and external return migration Most 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 family Incidence of non-migrant remittances increased during the crisis …but the amount of non-migrant remittances are smaller than migrant remittances

Europe and Central Asia Region, The World Bank Summary and final remarks (2)  Remittances play an important role in poverty reduction and accrue to some of the poorest and most vulnerable households Huge poverty reduction impact on recipients Higher rate of savings More spending on education, health and other goods and services  … but there is evidence that remittance flows may discourage labor supply Remittance recipient households borrow less