Figure 7. Current migrants are more likely to be unemployed prior to leaving Armenia (marginal effects)
Source: Authors’ estimation, using RAU survey data 2015-17.
6. COVID 19 exacerbating vulnerability of Armenian migrant households A decrease in labor migration could worsen the welfare of migrant households and the domestic economy. Remittance inflows were estimated at $1.5 billion (or 11.4 percent of GDP) in 2019, according to World Bank. These flows to the Europe and Central Asia region are projected to fall sharply, by about 28 percent, owing to the combined effect of the pandemic and nose-diving oil prices (World Bank, 2020b). The effect is expected to be felt sharp for Armenia, owing to its high dependence on remittances from Russia. The Kyrgyz Republic saw remittances falling by 9 percent in the first two months of 2020, compared with the same period of 2019 (ibid). Lower remittance inflows can generate a sudden income shock in migrant households and could make substantial impacts on poverty. The effects would be exacerbated if migrant household members in Armenia lost jobs due to COVID-19 crisis. Foreign earnings account for more than one-third of household income in migrant households (Figure 8.a). Remittances support households’ basic needs as well as health and education expenditures (Figure 8.b). A fall in remittances thus could increase poverty among Armenians, as well as depress wages through falling consumption demand 19. As shown in Table 2 below, migrant households have, on average, more dependents than non-migrant households. A 50-percent drop in remittances could increase poverty rate in poor households by 1.3 percentage points and moderately poor households by 1.1. percentage points (Fuchs et al., 2020). Figure 8. Remittances account for more than a third of households’ income (percent) Given its importance in the economy (accounting for some 11 percent of GDP in 2019), a sharp contraction in remittances is likely to bear broader macroeconomic implications, such as real exchange rates and current account balance, but this note refrain from delving into it, as the note is at the micro level - at the migrant and their household level.
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