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• Impact of Remittances on Bulgarian economy

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A few historical facts regarding Bulgarian
migration

• The first period (1990-2000) is characterized by
  the start of the transition and the economic
  downturn resulting from a number of radical
  economic and social reforms.
• During this period, the lack of jobs and poverty
  stimulated emigration. According to some sources,
  the number of Bulgarian migrants amounted to
  691 000 people.
• In this period the main directions of Bulgarian
  migrants were Germany, Czech Republic, Austria,
  Hungary, and USA.

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A few historical facts regarding Bulgarian
migration

• The second period (2000-2007) is characterized by
  a certain improvement in the economic and social
  environment, an increase of economic growth, job
  opportunities, income levels in Bulgaria. These
  factors contributed to a certain decrease in
  emigration flows.
• Data are showing that after 2003 there has been a
  tendency towards seasonal, rather than permanent,
  migration and this is related to the temporary
  mobility of the low-skilled labor force.
• Low qualified people mostly has the intention to
  move abroad for a short-time, for seasonal
  labour. The preferred destinations being Greece,
  Spain, Italy etc
• The level of highly qualified emigrants has
  dropped from 17 to 9, but the number of
  low-qualified workers has increased.
• The Bulgarian case is rather comparable to the
  other countries of Southeastern Europe (Romania,
  Albania, countries of the former Yugoslavia,
  Turkey and Greece before 1981.

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A few historical facts regarding Bulgarian
migration

• The third period of Emigration wave starts with
  the country became EU member. Its new status
  changed the structure of Bulgarian emigration to
  other developed EU countries.
• There is a trend of increased seasonal
  (circulating) migration, instead of the permanent
  migration.
• This is due to the enhanced temporary mobility of
  low qualified labor force as a result of
  Bulgarias exclusion from the List of Schengen
  Countries.
• The growth rate of the labor force with lower
  education degree from Bulgaria accounts for 5,8
  of the total number of emigrants.

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Main incentives for migration

• The greatest factor in choosing a country to
  settle and live abroad are said to be the
  language, the availability of friends or
  relatives there, as well as the pay for unskilled
  labor.
• The same data indicates that about two-thirds of
  those leaving Bulgaria as migrant laborers are
  ethnic Roma, rather than ethnic Bulgarians, who
  made the bulk of the migrants until recently.
• The considerable brain drain from Bulgaria is
  mainly due to economic factors, such as the lack
  of prospects for the young people for career in
  Bulgaria.
• The main incentive is that Bulgaria is continuing
  to be the poorer state amongst EU member states.
• GDP per capita in Bulgaria is about 40 of the
  average value of the EU member countries.
• The remuneration in Bulgaria is low and is
  lagging behind the remuneration in the other EU
  member states.

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Remittances by Bulgarian emigrants

• It is widely considered that Bulgarian migrants
  remittances, defined as cash or in kind transfers
  from migrants to relatives and others in their
  countries of origin play a role in maintaining
  basic living standards for many households in
  home countries.
• Over the last 12 years migrant remittances have
  assumed increased significance for many people in
  Southeastern Europe, Moldova and Bulgaria
• Pursuant to the estimates of the World Bank, over
  10 of the remittances of the emigrants are
  utilized for education and savings.
• However most of these remittances are spent on
  food and garments by the households, obtaining
  considerable support by these funds.
• About 5 are used for investments or support to
  private businesses.

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Remittances

• Remittances appear in Bulgarian BOP after 2000.
  Since 2004 to 2012 Q1Q2, Bulgarians living abroad
  have transferred nearly EUR 3740,6 billions.
• According to some unofficial estimates,
  emigrants remittances are between 30 - 40
  higher than officially recorded data.
• In Moldova, Albania, Romania remittances make up
  about 40 of GDP.

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Remittances from Bulgarian migrants Data from BOP
(BNB)
Years Remittances Mlns EUR Remittances ( ?f GDP)
2008 663,8 1,97
2009 693,4 2,07
2010 695 4.3
2011 770.1
2012 Q1/Q2 407.9
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• Actually the volume of remittances is much more
  higher because the banking statistics only
  account for the official money transfers.
  Bulgarians abroad usually wire their relatives
  largest sums.
• Remittances in Bulgaria are used mainly to
  purchase real estates, accounted as FDI.
• They are a higher financial opportunity for a
  part of the Bulgarian population,
• Enhance the opportunities for education and
  investments.
• In the years before the crisis FDI and
  remittances were considerable financial flows,
  being of benefit on macro level, contributing to
  the economic growth and to the higher employment
  and incomes of the part of the population.

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Remittances from Bulgarian migrants in Spain
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• According to data from the above survey,
  Bulgarian migrants in Spain receive cash an
  average of 400 to 800 euros, which indicates
  that
• - they are not engaged in the performance of
  complex manufacturing operations
• - work in agriculture and construction.
• 71.8 of the Bulgarian migrants made ?transfers
  (?remittances) to support and enhance the welfare
  of their relatives who remained in Bulgaria.

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Remittances from Bulgarian migrants in Spain
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• Remittances are mainly used for consumption.
• Many Bulgarian have gone to Spain to improve
  their financial situation, to pay back debts
  towards banks or other financial intermediairies,
  to increase savings
• Others send part of their income to rebuild some
  properties.
• Others invest in the education of family members,
  or they are using remittances for health care.
• According to BNB data for the period before the
  economic crisis, the majority of remittances of
  migrants (regardless of what country they are
  established) invested in real estate.
• Unlike the "old" immigration waves of Greeks,
  Italians, Spaniards, the Portuguese in Western
  European countries, the new Bulgarian emigration
  does not seek to invest income genereted abroad
  in some projects like starting a business in
  Bulgaria, open a small factory, creating a new
  activity in the home country.

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Remittances

• The remittances also have certain negative
  effects on the economy. Probably the flow of
  fresh money from the emigrants has reduced the
  incentives for job search.
• It could be supposed, that the increased
  remittances by the emigrants have probably
  reduced the pressure on the labor market and
  decrease the unemployment.
• The increased incomes of a part of the Bulgarian
  population result in more consumption costs,
  exerting pressure on the balance of trade for
  import of consumer goods.
• It results in the total level of the domestic
  prices and a rise in inflation.
• The pegged course of the Bulgarian Lev to the
  Euro prevents taking into consideration the
  inherent trends of the probable increase in the
  exchange rate of the national currency and thus
  assessing the lower competitiveness of the
  domestic goods and services.

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• Despite the economic crisis of 2007-2008 and the
  increase in unemployment in Western Europe,
  Bulgarian labor migration probably retained jobs
  and was able to remain in the labor market of the
  host country.
• Furthermore, the Bulgarian immigrants are
  flexible, because if they are getting fired or
  the enterprise close, they seek immediatelly for
  another job, even if it requires less training
  and lower wage.
• Bulgarian labor migration continues to send money
  back home and there was no significant reduction
  in the volume of remittances in the period to
  2011, even when most of the member states of the
  EU and the U.S. are experiencing a decline in
  economic activity and employment, monthly net
  transfers temporary fall and again begin to rise.
• This assertion is supported by money transfers
  from migrants compensation from employers and
  current transfers, as well as their salaries to
  evaluate the proportion of the income which is
  send back in the country.

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Remittances and compensation of employees by
employers ( of GDP) of Bulgaria
2006-2009Source Estimates by the World Bank,
the OECD
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Remittances, FDI

• Remittances reveal to be relatively more constant
  flow of funding than volumes FDI in Bulgaria.
• In 2008-2009, remittances were a main source of
  financing for households and a tool support to
  stuck consumption.
• From early 2011 to early 2012, FDI amounted per
  months faster than remittances.
• However FDI show much greater volatility and by
  the end of 2011 are shrinking to the volume of
  remittances.
• Over the year remittances show that in the
  post-crisis period, the Bulgarian migrants
  continue to send remittances, which are a
  additional funding not only for specific
  individuals, but also for the economy as a whole.
  
• Since 2008 FDI volumes are half of those in 2007,
  and remittances increased.

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Remittances (current transfers net) and FDI as
of GDP, 2002 - 2011 yearsSource BNB
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Remittances net, FDI net expressed in EUR
February 2011. - January 2012
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Conclusions

• Remittances have become a major cash income for
  many households.
• Remittances can cover only temporary financial
  shortfall, but can not compensate the income that
  could be realized if the Bulgarian economy was
  operating and generating jobs for skilled workers
  and the leakage of highly qualified personnel
• Differences in wages between Bulgaria and other
  EU member states will continue to "push"
  professionally trained workers outside from
  Bulgaria.