Monday, August 1 2022 15:58
Karine Melikyan

Massive arrival of Russians to Armenia, along with movement of their  capital, ensured 7-multifold increase in net inflow of remittances  from Russia in Q2 2022

Massive arrival of Russians to Armenia, along with movement of their  capital, ensured 7-multifold increase in net inflow of remittances  from Russia in Q2 2022

ArmInfo. The net inflow of transfers from individuals to Armenia recorded a 2.6-fold increase in H1 2022, reaching $978.9 million. Moreover, in the second quarter  alone, the net inflow increased more noticeably - 4.2-fold, forming a  quarterly volume of $791.7 million.

Such a significant growth was largely due to the multifold increase in the inflow of remittances from Russia, in parallel with which the growth of transfers from the  United States slowed down significantly. This is evidenced by the  data of the Central Bank of the Republic of Armenia.

Thus, in H1 2022, the inflow of transfers from Russia to Armenia  recorded a 3-fold increase- up to $1.13 billion, with an increase in  outflow by 13.7% - up to $214 million, as a result of which the net  inflow increased 5-fold - up to $917.5 million. The inflow of  transfers from Russia In Q2 2022, recorded a 3.7-fold increase, with  a decline in outflow by 27.1%, as a result, net inflow recorded a  7-multifold increase. As a comparison, we note that a year earlier,  in H1 2021, the inflow of transfers from Russia to Armenia showed an  increase of 18.3% (with a quarterly increase of 43.6%), while the  outflow was in decline by 0.5% (with a quarterly increase of growth  by 19%), which caused an increase in net inflow at the level of 46.1%  (with a quarterly growth of 74.7%).

At the same time, the y-o-y growth in the inflow of transfers from  the United States slowed down significantly to 22.5% - in H1 2022  (from 84.5% a year earlier), against which a high growth rate of  outflow remained - 42.1% (against 41.3% a year ago), which  significantly slowed down the growth of net inflows from the USA to  11.8% (from 2.2-fold a year earlier.  As a result, the volume of  inflow of transfers from the USA in H1 2022 amounted to $318.7  million, the volume of outflow to the USA - $131.1 million, and the  volume of net inflow - $187.6 million. In Q2 2022 alone, the inflow  of transfers from the USA increased by 23.1%, the outflow to the USA  - by 15.9%, which formed the growth rate of net inflow from the USA  at the level of 28.3%, and the current dynamics of these three  indicators almost repeat the growing rates of a year ago - 20.6%  (inflow), 10.4% (outflow), 26.6% (net inflow), respectively.

In total, the inflow of transfers from individuals to Armenia sharply  accelerated y-o-y growth in H1 2022 from 32.5% to 97.2%, reaching  $1.9 billion. A similar growth acceleration was observed in the  outflow of transfers - from 8.1% to 57.6%, with a volume of $ 891.1  million. In Q2 2022 alone, the inflow of transfers from individuals  to Armenia recorded a 2.3-fold increase, with an increase in outflow  by 38.6%, which significantly exceeds the last year's growth rates of  these indicators in Q2 2021 - respectively 33, 8% and 4.4%. As a  result, the y-o-y and quarterly uptrend of the net inflow of  transfers to Armenia accelerated the pace to a multifold increase.

The share of Russia in the inflow  in H1 2022 incresed to 60.5% from  39.6% in H1 2021 (vs. 32.7% in H1 2019). And the share of the United  States, on the contrary, decreased both in inflow in y-o-y terms from  27.4% to 17% (against 14.7% in H1 2019), and in outflow from 16.3% to  14.7% (against 20 .4% in H1 2019).

It is appropriate to note that the surge in transfers from Russia to  Armenia was provoked by the massive arrival of Russians along with  the transfer of their capital. Moreover, on a monthly terms, a  significant increase in the net inflow of transfers from Russia began  to be observed already in February (a 3-fold increase), continuing to  grow at a rapid pace in the following months. Such an increase in  transfers is explained by the arrival of a huge number of Russians in  Armenia who, due to the Russian-Ukrainian conflict and anti-Russian  sanctions applied by the West (including disconnection from the  S.W.I.F.T., withdrawal of Visa and MasterCard from the market,  blocking of Western social networks) faced difficulties in work,  financial and card transactions in their homeland.

In confirmation of the aforementioned, experts cite statistics of  companies opened in Armenia in April-May, the number of which has  increased significantly after the arrival of the Russians, and most  of them, in order to avoid anti-Russian sanctions, migrate and move  their capital. "In addition to business purposes, Russians spend  money in Armenia on recreation, entertainment, rental housing, etc.   These funds, in turn, spur growth especially in the service sector,  as well as in the real estate market and the trade sector.  As a  result, an increase in economic activity in Armenia in the first half  of the year by 11.8% per annum, to a greater extent came from the  growth of the service sector by 26.9%," experts say, stating with  confidence that this increase is caused by the arrival of such a  large number of Russians. But how long the growth of remittances and  how long-term - the stay of Russian citizens will be in Armenia,  according to experts, depends on the outcome of the Russian-Ukrainian  conflict and the West's mood to ease sanctions against Russia, and if  the latter takes place, then it is likely that most of the Russian  labor migrants, together with their capital, will return to their  homeland.  

We note that the Central Bank in June, improved its forecast for  2022, narrowing the expected decline in net remittances (including  income of seasonal workers and private transfers) to 12% from the  previous 20% (against 54% growth in 2021). The Central Bank  conditioned its forecast on the expected economic downturn in Russia  (by 7.4%) and the change in the dollar income of seasonal workers. In  the same forecast, the Central Bank improved its expectations for GDP  growth for 2022 from the previous 1.6% to an updated 4.9% (against  the actual 5.7% growth in 2021). According to the new forecasts of  the Central Bank of the Republic of Armenia, the ratio of  individuals' transfers to GDP will decrease from 9.2% to 6.5% in  2022, continuing to decline further to 4.3% in 2025, which indicates  the duration of the weakening of the economic effect in terms of the  impact of transfers on the economy. The forecast of the Central Bank  noted that the inflow of remittances, after high growth in the first  half of the year, will begin to slow down the upward pace. In the  context of a significant revaluation of the ruble against the US  dollar, remittances in dollar terms are estimated at a higher level  than was given in the previous forecast of the Central Bank.  In its  updated forecast report, the Central Bank reminds that remittances  from the US will slow down growth.  

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