Central Bank of Armenia: Net inflow of private transfers from Russia  increased 5.5-fold in 8 months of 2022

ArmInfo.an. The net inflow of transfers from individuals in January- August 2022 sharply  accelerated y-o-y growth from 58.2% to 2.4-fold, reaching $1.4  billion, almost 5-fold higher than the pre-Covid volume of the  comparable period in 2019.

To a greater extent, this is supported by  a tangible increase in remittances from Russia, in parallel with  which the activity of transfers from the United States is rapidly  declining. This is evidenced by the data of the Central Bank of the  Republic of Armenia.

In particular, the inflow of transfers from Russia to Armenia in  January-August 2022 sharply accelerated y- o-y growth from 13.4% to  3.5-fold, along with the 7% growth (from 9.7% decline a year earlier)  there was a trend of outflow of transfers from Armenia to the Russian  Federation. This sharply accelerated the y-o-y growth of the net  inflow of transfers from Russia from 45.4% to 5.5-fold. As a result,  the volume of inflow of transfers from Russia in January-August 2022  reached $1.9 billion, and the outflow to the Russian Federation -  $271.5 million, which formed a net inflow in this direction at the  level of $1.6 billion. But on a monthly terms, both in July and in  August, the inflow of transfers from Russia continued to decline,  accelerating from 2.1% to 26%, while the dynamics of the outflow, on  the contrary, recovered from the July 14.9% decline to the August  14.2% growth, which delayed the net inflow in recession with an  acceleration of rates from 1.1% to 28.6%. At the same time, the  inflow of transfers of individuals to Armenia from the United States  in January-August 2022 sharply slowed down growth from 52% to 19%,  amounting to $433.8 million, along with which the upward trend of the  outflow of transfers from Armenia to the United States slowed down  less noticeably from 44.7% to 40.4%, amounting to $174.04 million. As  a result, the y-o-y growth of the net inflow of transfers from  individuals from the USA slowed down significantly - from 56% to 8%,  amounting to $259.7 million, which was also observed in the dynamics  of the outflow of transfers to the United States, but at a more  noticeable pace - from a 33.1% decline to a 40.3% increase, as a  result, the net inflow decreased by 14.4% (against the July 10%  growth).  In total, the inflow of transfers from individuals to  Armenia sharply accelerated y-o-yl growth in January- August 2022  from 23.2% to 2.2-fold, exceeding $2.9 billion. A similar uptrend was  observed in the outflow of transfers - from 5.5% to 97%, with a  volume of $ 1.5 billion. This allowed the net inflow of transfers to  grow significantly.

The share of Russia in the inflow, increased in January-August 2022  from 41% to 65.3% (against 54.2% in January-August 2019), and in the  outflow decreased - from 33.3% to 18% (against 27.5% in January-  August 2019). And the share of the United States decreased in both  cases - from 27.2% to 15 % in inflow (against 14.3% in January-August  2019), and from 16.2% to 11.6% in outflow (against 23% in January-  August 2019). 

It should  be noted that Central Bank of the Republic of Armenia in  its forecast  for 2022, updated in September, further reduced the  decline in the  net inflow of transfers.  (including income of   seasonal workers and  private transfers) - to 7% from the previous  13% (against the actual  54% growth in 2021).  In its forecast, the  Central Bank bases this  improvement with the assessment of more  positive developments in the  Russian economy, projected decline of  which has been reduced to 4.2%,  from the previously expected 7.4%.   The ratio of individuals'  transfers to GDP, according to the new  forecast of the Central Bank  of the Republic of Armenia, will  decrease over 2022 from 9.3% to 6.3%, and the further expected y-o-y  decline (to 4.2% in 2025)  indicates a prolonged weakening of the  economic impact of remittances  on the economy.  In its new forecast,  the Central Bank once again improved its expectations for GDP growth  for 2022 - from the previous 4.9% to an updated 12.9% (against the  actual 5.7% growth in 2021).

However, it would be appropriate to note that in 2022 there has been   a surge in transfers from Russia to Armenia, provoked by the massive   arrival of Russians along with the movement of their capital.   Moreover, on a monthly term, 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. As a result, Russia's share in inflow increased to 60.5% in   H1 2022 from 39.6% in H1 2021 (vs.  51.3% in H1 2019). 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   the West's anti-Russian sanctions (including switching off S.W.I.F.T.   system, withdrawal from the Visa and MasterCard market, blocking of   Western social networks) faced with difficulties in their work,   financial and card transactions in their homeland.