Falling remittances threaten Armenia's economy
By Mushvig Mehdiyev
Remittances sent to Armenia from overseas declined drastically since the beginning of this year, the Armenian Central Bank reported.
The bank announced in its latest data that non-commercial money transfers to Armenia have fallen by 35.6 percent or $37.7 million during January and February.
Over the last year remittances to Armenia have seen a one third decrease in its overall amount inflicting a hard blow on the country's economy.
Earlier this year, the amount of money transferred to Armenia, mostly by migrant workers abroad stood at some $72.2 million compared to over $122.5 million worth of private remittances reported in January 2014.
The most drastic fall has been observed in the money transfers from Russia. The downward trend began last year. Money sent by labor migrants in Russia dropped by $35.8 million or 42.9 percent in total.
Since sanctions against Russia are likely to remain in place, there is no immediate expectation the economic situation will change and therefore Armenia will continue to feel the heat of its dependence on Russia.
The share of money transfers from Russia constitute 79 percent of the total remittances entering Armenia.
The devaluation of the Russian ruble and the overwhelming rise of the U.S. dollar's value put the Armenian money senders and receivers under aggravated stress. Armenia's purchasing power also slipped to a record low amid the remittances' 21 percent share in the country's GDP.
Private remittances are known to be the largest source of hard currency inflows into Armenia. For instance, in 2014, Armenia's total exports stood at just over $1.5 billion, while private remittances provided more than $2.1 billion.
Economic analyst Ara Galoyan expects poverty rate to increase in Armenia as money transfers will continue to drop and therefore the country will continue to suffer.
“It is evidently clear that Armenia’s main export item is its labor force. Every year our citizens go to Russia and send part of their incomes back home,” says Galoyan.
According to a report published by the Central Bank in February, Armenia’s economic growth may fall 10 times under the growth rate the government projected. While the government plans to ensure growth at over 4 percent, the Central Bank evaluated the country’s economy will only expand in 2015 by 0.4-2 percent. The Central Bank also expects that private remittances will fall by approximately 30 percent this year.
In a very recent WB report, Armenia found itself among the top ten countries which have been classified as most dependent on remittances in the world.
Private money transfers from abroad have shared a crucial part in Armenia's gross domestic product indices both in the past and today. The overall share of migrant money in Armenia's GDP is calculated at $2 billion of a total $10 billion.
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