Statics performed by Eurostat, the statistical office of the European Union showcases new trends in the recent developments in the international remittance sphere in the EU zone. The data showcases that almost 60% of personal remittances are sent within the EU Member States, Croatia and Latvia position themselves as the most dependent countries on international remittances in the EU and that the US has become the main source of income for EU citizens working abroad.
The data collected by Eurostat refers to the narrowest concept of international remittances, which are personal remittances, a concept based on two main components: personal transfers and compensation of employees. In this context, personal transfers refers to transfers sent by migrants to their home economies. This dynamic show net outflows in the EU-28 (more outflows than inflows). On the other hand, compensation of employees which includes wages earned by employees who work in other countries on short-term work contracts, as seasonal workers or cross border commuters, shows an increase in net inflows (more inflows than outflows).
EU-28 has traditionally exhibited a stable pattern characterized by a higher degree of net outflows of personal transfers which exceeded net inflows of compensation of employees. Nonetheless, from 2008 to 2014 net outflows in personal remittances embarked on a decreasing trend, going from EUR 13.9 billion in 2008 down to EUR 1.4 billion in 2014. But data shows that in 2015 they turned into a surplus of EUR 2.8 billion, leaving the EU-28 for the first time as net receiver of personal remittances from the rest of the world. This suggest that net transfers sent by migrants in the EU to their home economies became less than the net incomes earned by EU citizens working abroad. During that year net inflows in compensation of employees culminated at EUR 23.2 billion, while net outflows in personal transfers only reached EUR 20.5 billion. But since then, this trend has witnessed a reversal, with decreasing net inflows from the compensation of employees and increasing net outflows from personal transfers. As a result, the balance in personal remittances turned negative again, assuming in 2017 a deficit of EUR 5.1 billion, although the EU is currently far from being the major net payer in personal remittances as it was in 2008. Net inflows in the income generated by EU citizens through their work abroad decreased since 2015 to EUR 17.0 billion in 2017, and net outflows in personal transfers by migrants to their home economies jumped from EUR 19.0 billion in 2013 to EUR 22.0 billion in 2017.
Remittances are often linked to migration, and the surge in migration in 2015 has re-emphasised the importance of migrant transfers. Since 2014 outflows in personal remittances started to rise significantly again from EUR 40.8 billion in 2014 to EUR 48.6 billion in 2017. On the other hand, inflows in personal remittances dramatically increased since 2008 with a growing importance of income flows generated by EU citizens working abroad. The extent of inflows in personal remittances to the EU-28 increased from EUR 28.0 billion in 2008 to EUR 46.0 billion in 2015, which contributed to the earlier mentioned consolidation trend in remittances’ in- and outflows. While outflows are predominantly driven by personal transfers, inflows are sustained by compensation of employees from border, seasonal or short-term work contracts by EU residents in other economies. Keep in mind that since 2015 growth in outflows exceeds considerably annual growth in GDP, while growth in inflows fell dramatically below GDP growth. This shift in balance is a good indicator of the favourable labour market conditions for migrant workers in the EU-28 and a boost in payments made to their home economies. Subsequently, outflows in personal remittances increased at annual growth rates of 6% and more. In contrast, inflows fell by 6.4% in 2016 and recovered slightly by growing by 1.3% in 2017.
Migration hotspots in Europe
At the beginning of 2017, 7.5% of the total population of EU Member States lived outside their home economies. A stark contrast, compared to 17.1% of foreign born workers in the USA and Canada with 21.9% of foreign born population. However, statistics show an uneven distribution. Countries like Luxembourg (47.6%), Liechtenstein (33.8%), Switzerland (24.9%) Cyprus (16.4%), and Austria (15.2%) show relatively high shares of foreign-born population, but some European countries have no significant resident foreign population. Poland and Romania only register with 0.6%. This uneven distribution showcases a considerable migration flows of workers across Europe or abroad, and seasonal or border work between countries, which provides the basis for significant international remittance flows.
Western Europe, a focal point for cross-border remittances
The major sending economies of personal remittances in terms of outflows are Germany (17.2%), France (10.5%), Luxembourg (9.9%) and the Netherlands (8.8%). While Germany, Luxembourg and the Netherlands have their remittance outflows mainly based upon income generated through border, seasonal or short-term work, remittance outflows in France generally come from personal transfers.
The major recipient economies of personal remittances in terms of inflows are France (20.4% ), Germany (13.7%) and Belgium (8.7%). In general, countries with an economy based on income generated through border, seasonal and short-term work.
An analysis of the major corridors in personal remittances places the above figures in a bilateral context, where geographical proximity plays a key role. In 2017 France observed major corridors with all its neighboring countries representing significant inflows, most notably from border and seasonal work of French residents in Switzerland (EUR 11.6 billion), Luxembourg (EUR 5.2 billion) and Germany (EUR 2.7 billion), while figuring as a main source for personal transfers to Morocco (EUR 2.0 billion) and Portugal (EUR 1.1 billion). Similarly, Germany, the Netherlands, Belgium, and Luxembourg are exposed to their neighboring countries in terms of border and seasonal work relations, while Belgium and Luxembourg also record significant inflows from the European Institutions domiciled in their jurisdictions (Belgium EUR 3.8 billion, Luxembourg EUR 1.3 billion).
Beyond the limits of geographical proximity, Germany is the major source of income for seasonal workers from Romania (EUR 1.8 billion) and migrant transfers to Serbia and Turkey (both EUR 0.8 billion), while France figures as sending economy for migrant transfers to Morocco (EUR 2.0 billion) and Portugal (EUR 1.1 billion). Italy records outflows in personal transfers to Romania (0.7 billion), Australia, the Philippines and India (each EUR 0.3 billion). As the major powerhouse for employment of EU citizens outside Europe appears Switzerland, which generates considerable inflows in compensation of employees to the EU. France (EUR 11.6 billion), Italy (EUR 4.4 billion), Germany (EUR 4.3 billion), Portugal (EUR 0.8 billion) and Austria (EUR 0.6 billion) benefit significantly from their residents working in Switzerland. On a similar note, Liechtenstein figures as a prominent source of income for Austria (EUR 0.5 billion), and Norway for Sweden (EUR 1.1 billion) in 2017.
Levels of dependency on international remittances in the EU
The dependency rate on international remittances is determined by the share of inflows in personal remittances in percentage of the respective country’s GDP. According to this formula, the highest dependency rates on remittances in Europe are observed in Croatia (4.5% of GDP) and Latvia (4.1% of GDP) in 2017. On the other side of the spectrum, the least dependent economies in Europe are Greece, the United Kingdom and Ireland (each with 0.2% of GDP). In comparison, South-Eastern European economies appear much more reliant on this source of income: Kosovo (15.3% of GDP), Montenegro (10.7% of GDP), Albania (10.0% of GDP), and Serbia (8.6% of GDP).
The US, main source of income for EU citizens working abroad
The balance in personal remittances of the EU-28 with countries abroad is recorded as a considerable surplus of EUR 1.6 billion with the United States. The most prominent inflows come in this context from the compensation of employees by German, British and French residents working in the United States, as well as from personal transfers sent by Portuguese, Lithuanians, and Bulgarians to their home economies. However, as Europe is a net payer of personal remittances to the rest of the world, the bilateral balances with most overseas partners are otherwise negative. Major net outflows were recorded to Morocco (EUR 3.3 billion), China (EUR 1.5 billion) and Turkey (EUR 1.4 billion) in 2017. Net outflows to Morocco and Turkey were based on personal transfers, while those to China were based both on personal transfers and compensation of employees.
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