Transcript Luxembourg Group on Remittances Moldova

International Technical Meeting on Measuring Remittances
World Bank Washington, DC
The implications of the recent financial crisis
on the measurement
of remittances in Moldova
June 11-12, 2009
1
Geographical Location
Strategically located at the crossroad
between Eastern and Western Europe
Capital: Chisinau 785,087 people
Area: 34,000 km2
Population of the right-side territory of Moldova: 3.57 million
GDP for 2008 – US$ 6,048 million
GDP per capita –US$ 1,694
External debt per capita – US$ 1,156
2
Emigration prerequisites

the largest share of non-urban population in Europe

classified in the second group of countries regarding the population
density, among Denmark, Poland, the Czech Republic and Armenia

strong economic, cultural, and personal ties with the countries of the
former Soviet Union

free movement (without visas) within CIS and before 2007 with other
South-East European countries

absence of language barriers with CIS countries and Romania
3
Labor migration profile

Main countries of destination:
Russia – about 60%;
EU countries – 27%,
o.w. Italy – approximately 18%, the rest - Spain, Portugal, Ireland, Greece, Romania, and
other
other countries –Israel, Turkey, Ukraine etc.

Sector of employment and duration of staying in host country:
CIS countries – construction, seasonal migration
EU and other countries – house-keeping and other services, long-term staying

Methods used for money transferring:
formal methods (bank transfer, money transfer operators, post offices) - about 65%;
informal methods (money brought personally, by drivers, train attendants, friends) - 35%
Source: NBS, Labor Force Migration in the Republic of Moldova (Based on data collected as a module of the
second quarter 2008 Labor Force Survey, April 2009)
4
Gross Remittances to GDP ratio
$US
600
%
40
35
500
30
400
25
300
20
15
200
10
100
5
0
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Remittances/GDP
Remittances per capita (right axis)
5
Gross remittances and trade deficit
100
%
$US million
6000
90
5000
80
70
4000
60
50
3000
40
2000
30
20
1000
10
0
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Exports of goods and services
Imports of goods and services
Remittances/ deficit in goods and services acoount (left axis)
6
Remittances vis-à-vis other inflows
2000
1800
1600
1400
1200
1000
800
600
400
200
0
2000
2001
2002
2003
2004
2005
2006
2007
Foreign direct investment (net)
External loans (drawings)
Inflow of governmental transfers
Remittances
2008
7
Why this method was chosen?

No relevant statistics on the number of migrants working
abroad illegally

Varied data on ratio of money transferred through non-official
channels

No applicable counterpart statistics on remittances to Moldova
8
Main Steps and Data Sources for Remittances
Estimation
Main steps in remittances estimation
Data sources
A
Measurement of remittances flows passing via
banks
International Transactions Reporting System
(ITRS)
B
Measurement of remittances flows passing through
banks assumed to be cashed
ITRS
C
Measurement of net foreign currency in cash
released by banks to residents
Information on sales/purchases of foreign currency
in cash by banks.
Information on export / import of foreign currency
in cash by banks.
D
Measurement of residents’ expenditures on the
markets where transactions are mostly made in
foreign currency
Information on transactions with real estate: number
of transactions, average market prices of real estate,
investment in new real estate.
Information on the number and value of cars
imported by individuals.
E
Evaluation of consumption behavior of households
receiving remittances
Labor force survey, specially designed surveys on
labor migration, Household budget survey
F
Comparative analysis of the A-E steps results.
Adjustments to remittances made via banks.
The results are presumably equal to personal
remittances in cash through informal channels.
A-E steps results.
.
Banks’ balance sheet - data on deposits of
individuals in foreign currency
9
Remittances and formal personal transfers
2000
$US million
1500
1000
500
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Remittances
Personal transfers from abroad via banks
10
Shortcomings of the estimation model and ways of
improvement

the model relies on many assumptions about the payment behaviour of
households relative role of national currency, ratio of cash and banks
transfers, etc. Payment behaviour may change over time. Empirical
verification of assumptions is important and requires periodical appropriate
surveys to be conducted.

more variables should be added at the side of expenditures in foreign
exchange cash, like current expenditures and other durable consumer
goods.
11
Why ITRS is the basis for the remittances compilation?

the money transfer operators in Moldova work exclusively through banks;

banks are supervised by the NBM, which is authorized to audit the reporting, that
means that the quality of reports is satisfactory;

closed ITRS system – there are no thresholds on data reporting, that means that
banks and economic agents report all transactions no matter the value;

transfers made through the MTCs are identified separately in the ITRS;

quick collection of detailed country and currency breakdown data;

typical frequency of aggregate data availability – monthly. Since November 2008
banks also report the data on transactions with non-residents on a daily basis. These
are the most timely data which are used for estimates;

it is stressed that reporting to the NBM is entirely distinct from tax and customs
obligations.
12
Drop in the value of personal transfers received via banks
US$ million
250
200
150
100
50
0
Jan Feb Mar Apr May Jun
-50
Jul Aug Sep
Oct Nov Dec Jan Feb Mar Apr May Jun
2007
Money transfers from abroad by natural persons
Jul Aug Sep
2008
Oct Nov Dec Jan Feb Mar
2009
Net offer of foreign currency by individuals to banks
13
Dimensions of labor force left abroad register a drop
Source
IOM - CBS-AXA Survey
Period
July - August 2008
Number
(thous. persons)
Evolution
430
-18%
IOM - CBS-AXA Survey
March 2009
353
Labor Force Survey (NBS*)
3 quarter 2008
340
- 17%
Labor Force Survey (NBS)
1 quarter 2009
272,5
Source: Survey conducted in March 2009 by International Organization for Migration (IOM)-Center for Sociological
Investigations and Marketing (CBS-AXA)
*National Bureau of Statistics
14
Shortcomings of an ITRS in the case of personal
transfers/remittances compilation

batching of small amounts of individual transfers into single payment. This
results in misclassification of the sending country. Geographical breakdown
is distorted;

possible reporting of “net” amount instead of gross flow;

the funds transferred using money transfer companies are not exclusively
remittances/personal transfers but can include travel transactions, financial
account transaction related to investment etc.
Solution of the problems – ask banks to report on geographical and other
details at the moment of remittances withdrawal
15
Personal transfers from abroad by region
600 $US million
500
400
300
200
100
0
Q1 2008
Q2 2008
European Union
Q3 2008
CIS
Q4 2008
Q 1 2009
Other countries
16
Personal transfer from abroad by main countries
120
US$ million
5
US$ million
4.5
100
4
3.5
80
3
2.5
60
2
40
1.5
1
20
0.5
Russia
2008
2009
Israel
Ireland
Portugal
2009
United Kingdom
Spain
17
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
2008
Jan
0
0
Geographical structure of personal transfers from abroad
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Q1 2008
Q2 2008
European Union
Q3 2008
CIS
Q4 2008
Q 1 2009
Other countries
18
Personal transfers via banks for investment in real estate
US$ million
18
16
14
12
10
8
6
4
2
0
Q I 2006
Q II
2006
Q III
2006
Q IV
2006
Q I 2007
Q II
2007
Q III
2007
Q IV
2007
Q I 2008
Q II
2008
Q III
2008
Q IV
2008
Q I 2009
19
Financial account transactions related to remittances

Since 2006 formal personal transfers from abroad clearly identified in the
ITRS as intended for “real estate acquisition” or with a high value are
recorded under Direct investment – in national economy –liability to nonresident. Practically all of them are made by non-residents from countries
other than CIS. Sharply dropped in the Q1 2009 due to the financial crisis.

According to the recent NBS survey on the Labor Force Migration –
complementary to the regular Labor Force Survey - made in Q2, 2008 the
share of remittances used for real estate purchase is about 20% of the total
amounts received.

Associated problems of recording:
- underestimation of investment made from remittances.
-with regard to the possible return of long-term migrants to home country
and the consequent change of residency the problem of estimating other
adjustments in the international investment position appears.
20
Conclusions

Migration and remittances are country specific issues, depend on many
factors such as geographical location, legal regulation of cross-border
movement in host countries, language barriers, education level of migrants,
etc. That is why countries should take into consideration their own
specifics while elaborating estimation methods.

As the factors that influenced migration and remittances are changeable the
methods of their estimation can not be permanent. They need periodical
revisions.

Even if the data sources used for estimations seem to be reliable, use of
additional data sources for the validation of assumptions is necessary
21
Thank you for attention!
22