Labor migrants are still a critical component in the economy of Tajikistan keeping many families at home above the poverty line.
The latest Migration and Development Brief notes that that as a share of gross domestic product (GDP) for 2021, the top three recipients were Lebanon – 54 percent, Tonga – 44 percent and Tajikistan – 34.5 percent.
The report says that after growing just 1.5 percent in 2020, remittance flows to Europe and Central Asia rose about 8.0 percent to a historic high of $74 billion in 2021, growing at a faster pace than initially envisioned in the November 2021 Brief. The increase was mainly due to stronger economic activity in European countries and rebounding energy prices.
Meanwhile, remittance flows to the region are projected to fall by 1.6 percent in 2022 as the economies of major remittance-sending countries are expected to weaken amid increased uncertainty and tighter financial conditions due to the so-called “special military operation” launched by Russia in Ukraine on February 24 and higher inflation.
The May 2022 Brief says it is expected that remittances from Russia could decline by as much as 40 percent in 2022, resulting in a drop in transfers to Central Asian countries that are highly dependent on them.
Remittances were the largest source of external finance for the Eastern Europe and Central Asia region in 2020 (and 2018). During 2021, however, remittance receipts have been much smaller than FDI, which grew more than three times from a year earlier.
The surge in FDI was reportedly due mostly to developments in Russia, which received about $42 billion in 2021, up from just $9.5 billion in 2020. However, exposure through FDI flows from Russia to its neighboring countries appears to be limited, according to the report.
As a share of GDP, remittance receipts in Tajikistan and Kyrgyzstan reportedly lead among regional economies in 2021, at 34 percent and 33 percent, respectively, as remittances remained by far the largest source of foreign currency earnings for these countries, and were comparable to—or even larger than—the countries’ exports of goods and services.
For Uzbekistan, the most populous country in Central Asia, remittances accounted for more than 13 percent in 2021.
Seasonal migrant workers provide vital support to these countries, which sent 7.8 million workers combined to Russia in 2020. With high unemployment and substantial government deficits, these countries cannot afford to increase public expenditure to support domestic demand and are highly dependent on overseas remittances.
Russia is the largest source of remittances to many Central Asian countries, but transfer volumes have reportedly been on a downward trend since 2014 peaks. Despite this, outward remittances from Russia remain large and account for roughly two-thirds of total remittance receipts for Central Asian countries, Kyrgyzstan, Tajikistan, and Uzbekistan, as well as for Armenia and Azerbaijan in 2021.
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