Multimillion-dollar remittances sent home by Armenians working in Russia have started falling at accelerating rates amid slowing economic growth in Armenia.
According the Central Bank of Armenia (CBA), local commercial banks processed almost $585.5 million in incoming non-commercial cash transfers from Russia from May through August, down by almost 5 percent year on year. The sum accounted for almost 85 percent of overall remittances, which fell by only 1.8 percent in that period.
By comparison, non-commercial wire transfers from Russia rose by almost 12 percent to $1.61 billion in the whole of 2013. The figure was equivalent to roughly 16 percent of Armenia’s Gross Domestic Product.
Data from the CBA shows that remittance inflows from Russia stopped growing in April and began increasingly falling in June. They plummeted by almost 8 percent year on year in August.
The decrease comes amid growing signs that the Russian economy is plunging into recession not least because of economic sanctions imposed on Moscow by the West due to the Russian intervention in the crisis in Ukraine.
The remittances have long been a major source of income for many Armenian families. They also enable the country to finance its huge trade and current account deficits. Hence their significance for Armenia’s macroeconomic performance.
Hrant Bagratian, a parliament deputy and a former prime minister critical of the current Armenian government, said on Monday that the falling remittances are inevitably stifling GDP growth in the country. “The only good thing that might come about is a slight decrease in prices,” Bagratian told RFE/RL’s Armenian service (Azatutyun.am). “But deflation is very bad for the economy [as a whole.]”
The International Monetary Fund and the World Bank have revised downwards their growth projections for the Armenian economy, saying that it will likely expand by roughly 2.6 percent this year. Both Washington-based institutions forecast growth rates of more than 4 percent late last year. They say that the worsening economic conditions in Russia are a key factor behind Armenia’s slower-than-anticipate growth.
Bagratian agreed with the latest IMF and World Bank outlooks. “Unfortunately, a worst-case scenario is now materializing,” he said. Armenia’s upcoming accession to the Russian-led Eurasian Economic Union will only make matters worse, he claimed.