CIS migrant workers send less money home

As the world's rich economies sink into recession, the flow of remittances into developing countries is expected to see a corresponding decrease. In the CIS countries that rely heavily on payments from migrant workers abroad, the effect could be highly damaging. The construction and consumer-related sectors are expected to be particularly badly hit, writes the web publication Business New Europe, quoted by Info-Prim Neo . The Organisation for Economic Co-operation and Development (OECD) forecasts a drop of 6% in remittance payments to developing countries from their nationals working abroad in 2009. CIS countries are among the largest recipients of remittance payments measured in comparison to their GDP. The Remittances Factbook 2008, published by the World Bank, finds that Tajikistan and Moldova are tied as the top remittance receiving countries – remittance inflows amount to 36% of their GDP. Other CIS countries are also high on the list: Kyrgyzstan was in 4th place, with transfers from migrants equal to 27% of its GDP; in Armenia the figure is 18%. Only Russia and Kazakhstan have net outflows of money. Speaking at the World Bank/IMF annual meeting recently, Shigeo Katsu, World Bank vice president for Europe and Central Asia, warned: "This money sent back home is second only to foreign direct investment as a source of external finance across the region, and is the largest source of external finance for a number of low income and lower middle income countries." Moldova has seen many migrants return home in recent months, according to Matthias Lücke, senior economist at the Kiel Institute and head of the institute's project on migrant remittances in CIS countries. There are already signs the flow of money into the CIS' poorer economies is tailing off as the US and West European economies suffer from the second wave of the credit crisis. Aside from consumption, the sector that has benefited the most from remittance inflows is real estate. Poor business environments and under-developed stock markets mean there are few alternatives to investing in real estate - aside from saving abroad or keeping their money under the mattress. As a result, the housing sectors in most of these countries have boomed lately, out of proportion to continuing low wage levels. "What do migrants do with their money? The business climate in Moldova is so awful that unless you are well connected, you can't invest it in the country since everyone will be demanding payoffs," says Lücke. "The options are to renovate your house, to keep it under the mattress or to save it abroad in preparation for when you emigrate permanently. People are also buying real estate in the capital – there is a real property bubble for apartments in Chisinau," says German researcher.