Personal remittancesstatistics Statistics Explained

Source : Statistics Explained (https://ec.europa.eu/eurostat/statisticsexplained/) - 14/02/2020 1

Data extracted in November 2019.Planned article update: November 2020.

Net personal remittances of the EU-28 with the Extra EU-28 (millions EUR)Source: Eurostat(bop_rem6)

This article presents statistics and comments on recent developments relating to international remittances inthe European Union (EU) . It refers in particular to personal remittances according to the concept of the Bal-ance of payments and international investment position manual (BPM6) . The data situation currently onlyallows the production of approximate figures on personal remittances . This refers to the narrowest conceptof international remittances, which are "personal remittances" and it is based on two standard components –personal transfers and compensation of employees.

EU-28 is a net payer in personal remittances to the rest of the world againAccording to the BPM6 methodology, personal remittances consist of both transfer and income elements (per-sonal transfers and compensation of employees). While personal transfers1(i.e. transfers sent by migrants totheir home economies) generally show net outflows in the EU-28 (more outflows than inflows), compensationof employees (i.e. wages earned by employees who work in other countries on short-term work contracts, as

1 News release - Personal transfers in the EU

seasonal workers or cross border commuters) show net inflows (more inflows than outflows).

Traditionally, net outflows of personal transfers exceed net inflows of compensation of employees in the EU-28(Figure 1), thus Europe is generally a major net payer in personal remittances to other parts of the world.However, from 2008 to 2014, net outflows in personal remittances were subsequently decreasing, going fromEUR 13.9 billion in 2008 down to EUR 1.4 billion in 2014. In 2015, they turned into a small surplus of EUR0.1 billion, leaving the EU-28 for the first time as net receiver of personal remittances from the rest of theworld. This meant that net transfers sent by migrants in the EU to their home economies became less thanthe net incomes earned by EU citizens working abroad. Indeed, during that year net inflows in compensationof employees culminated at EUR 20.6 billion, while net outflows in personal transfers were only at EUR 20.5billion. Ever since, this trend has been reversed, with decreasing net inflows from compensation of employeesand increasing net outflows from personal transfers. As a consequence, the balance in personal remittancesturned negative again, assuming in 2018 a deficit of EUR 9.9 billion, although the position of the EU as a netpayer in personal remittances is still not as pronounced as it was in 2008. Net inflows in income generated byEU citizens through their work abroad decreased since 2015 to EUR 14.8 billion in 2018, and net outflows inpersonal transfers by migrants to their home economies dynamically increased from EUR 19.0 billion in 2013to EUR 24.6 billion in 2018 (Figure 1).

Figure 1: Net personal remittances of the EU-28 with the Extra EU-28 (millions EUR)Source:Eurostat (bop_rem6)

Surge in migration in 2015 re-emphasises the importance of migrant transfersWhile outflows in personal remittances from the EU-28 stagnated slightly below EUR 40 billion between 2009and 2013, in 2014 they started to rise significantly again from EUR 40.8 billion in 2014 reaching EUR 53.7billion in 2018 (Figure 2a). Inflows in personal remittances have, on the other hand, dramatically increasedsince 2008 with a growing importance of income flows generated by EU citizens working abroad. The extentof inflows in personal remittances to the EU-28 boosted from EUR 28.0 billion in 2008 to EUR 43.6 billionin 2015 (Figure 2b), which effectively contributed to the earlier mentioned consolidation trend in remittances’in- and outflows. While outflows are predominantly driven by personal transfers (in 2018: EUR 35.6 billion),inflows are mostly nurtured by compensation of employees from border, seasonal or short-term work contractsby EU residents in other economies (in 2018: EUR 32.9 billion). Since 2015, growth in outflows exceeds con-siderably annual growth in GDP, while growth in inflows fell dramatically below GDP growth, indicating thefavourable labour market conditions for migrant workers in the EU-28 and a boost in payments made to theirhome economies. Accordingly, outflows in personal remittances (supported in particular by personal transfers)increased at annual growth rates of 6% and more. Inflows on the other hand maintained a steady level since2015 (Figure 3).

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Figure 2a: Structure of personal remittances, outflows from the EU-28 (millions EUR)Source:Eurostat (bop_rem6)

Figure 2b: Structure of personal remittances, inflows to the EU-28 (millions EUR)Source: Eu-rostat (bop_rem6)

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Figure 3: Personal remittances of the EU-28 with the Extra EU-28, annual growth rate(%)Source: Eurostat (bop_rem6), (nama_10_gdp)

Three out of five euros remitted across borders remain within the EU-28About 60 % of total outflows and inflows in personal remittances in 2018, as in the previous years, went to/camefrom EU Member States , i.e. EU-28 residents predominantly (but not exclusively) remit among themselves.This does not come as a surprise given that EU citizens are allowed to move freely within the EU labour market.There are, however, considerable disparities between the EU Member States in regard to their relative exposureto the rest of the world: in countries like Poland (97 % of total national outflows), Greece (84 %), Italy (76%), France and Lithuania (both 73 %) personal remittance outflows went predominantly to economies outsidethe EU-28, while Italy (71 % of total national inflows) Austria (63 %) and Malta (61 %) received their inflowsmostly from outside the EU-28. As the most EU-centered economies in regard to international remittances,Luxembourg on the other hand recorded only 0.2 % of its total outflows beyond the EU-28, and Slovakia only1.7 % of its total inflows from outside the EU (see Tables 1 and 2).

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Table 1: Personal remittances, total outflows (million EUR)Source: Eurostat (bop_rem6)

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Table 2: Personal remittances, total inflows (million EUR)Source: Eurostat (bop_rem6)

Migration is concentrated on a few hotspots in EuropeAt the beginning of 2018, 7.8 % of the total population in the 28 EU Member States lived outside their homeeconomies2. This compares to 17.4 % of foreign born workers in the USA3and 21.9 % of foreign born populationin Canada4. However, while countries like Luxembourg (47.8 %), Cyprus (17.3 %), and Austria (15.7 %) showrelatively high shares of foreign-born population5(in EFTA : Liechtenstein 34.0 % and Switzerland 25.0 %),some European countries have no significant resident foreign population, e.g. Poland and Romania (0.6 %).This situation points at considerable migration flows of workers across Europe or abroad, and seasonal or borderwork between countries, which provides the fundamentals for significant international remittance flows.

2Including citizens who moved between EU Member States and stateless persons

3 US Bureau of Labour Statistics (2018)

4 Statistics Canada (2016)

5Latvian and Estonian figures appear hardly comparable in this context due to the status of the Russian minorities in thesecountries.

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Table 3: Foreign-born population on 1 January 2018 (thousands)Source: Eurostat(migr_pop1ctz)

Western European countries are the focal point for cross-border remittancesThe major sending economies of personal remittances (in terms of outflows) are Germany (17.4 % of total out-bound personal remittances from the EU-28), France (10.4 %), Luxembourg (9.7 %) and the Netherlands (9.1%). While Germany, Luxembourg and the Netherlands have their remittance outflows predominantly basedupon income generated through border, seasonal or short-term work, remittance outflows in France mainlystem from personal transfers. The major recipient economies of personal remittances (in terms of inflows) areFrance (20.5 % of total inbound personal remittances to the EU-28), Germany (13.7 %) and Belgium (9.4 %),all predominantly based on income generated through border, seasonal and short-term work (see Maps 1a and1b).

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Map 1a: Personal remittances in Europe, Outflows from countries to the rest of the worldSource:Eurostat

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Map 1b: Personal remittances in Europe, Inflows to countries from the rest of the worldSource:Eurostat

An analysis of the major corridors in personal remittances places the above figures in a bilateral context, inwhich geographical proximity naturally plays an important role. In 2018, France observed major corridors withall its neighbouring countries representing significant inflows, most notably from border and seasonal work ofFrench residents in Switzerland (EUR 11.4 billion)6, Luxembourg (EUR 5.6 billion) and Germany (EUR 2.8billion), while figuring as a main source for personal transfers to Morocco (EUR 2.1 billion) and Portugal (EUR1.1 billion). In a similar manner, Germany, the Netherlands, Belgium and Luxembourg are exposed to theirneighbouring countries in terms of border and seasonal work relations, while Belgium and Luxembourg alsorecord significant inflows from the European Institutions domiciled in their jurisdictions (Belgium EUR 4.0 bil-lion, Luxembourg EUR 1.5 billion). Beyond the limits of geographical proximity Germany is the major sourceof income for seasonal workers from Romania (EUR 2.0 billion) and migrant transfers to Serbia and Turkey(both EUR 0.8 billion), while the Netherlands figures as sending economy for the compensation of employeesto Poland (EUR 2.0 billion), the United Kingdom and the United States (each EUR 0.8 billion). Italy recordsoutflows in personal transfers to Romania (EUR 0.7 billion) and the Philippines (EUR 0.4 billion). The majorpowerhouse for employment of EU citizens outside the EU-28 is Switzerland, generating considerable inflowsin compensation of employees to the EU. France (EUR 11.4 billion), Germany (EUR 4.2 billion), Italy (EUR4.2 billion), Portugal (EUR 0.9 billion) and Austria (EUR 0.6 billion)7benefit significantly from their residents

6Due to the unavailability of Swiss data, this figure was derived from inbound flows reported by France.

7Due to the unavailability of Swiss data, figures were derived from inbound flows reported by France, Germany, Italy, Portugal

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working in Switzerland. Similarly Liechtenstein figures as a prominent source of income for neighbouring Aus-tria (EUR 0.5 billion) in 2018.

Table 4: Major remittance corridors in 2018, outflows (millions EUR)Source: Eurostat(bop_rem6)

Croatia, Bulgaria and Latvia are most dependent on international remittances in theEUDependency rates on international remittances are measured by the share of inflows in personal remittances inpercentage of the respective country’s GDP. According to this, the highest dependency rates on remittances inthe EU-28 are observed in Croatia (6.3 % of GDP), Bulgaria and Latvia (both 3.6 % of GDP) in 2018 (seeFigure 4), while the least dependent economies in the EU-28 are Greece, Ireland and the United Kingdom (each0.2 % of GDP). By comparison, south-eastern European economies appear much more reliant on this source ofincome: Kosovo (15.6 % of GDP), Montenegro, Bosnia and Herzegovina (both 10.7 % of GDP), Albania (9.7

and Austria.

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% of GDP) and Serbia (7.5 % of GDP).8

Figure 4: Inbound personal remittances, 2018 (% of GDP)Source: Eurostat (bop_rem6),(nama_10_gdp)

Czechia, Croatia, Lithuania and Portugal eliminate their current account deficits frompersonal remittancesIn the above context of importing national wealth of Member States via the economic activities of the diaspora,personal remittances also provide an essential contribution towards reducing national current account deficitsor even contribute to current account surpluses. In 2018, four Member States recorded a current account sur-plus, which would have turned into a deficit without the impact of personal remittances. Those were Czechia,Croatia, Lithuania and Portugal (see Figure 5). Most prominently, Portugal showed a current account surplusof EUR 0.8 billion. Without personal remittances, this would have turned into a considerable deficit of EUR2.5 billion in 2018. The major inflows in personal remittances to Portugal came from workers’ remittancessent by Portuguese people from France (EUR 1.1 billion) and Switzerland (EUR 0.9 billion). Croatia showeda current account surplus of EUR 1.0 billion, which would have turned into a current account deficit of EUR1.8 billion. Personal remittances inflows to Croatia came from the compensation of employees and personaltransfers in similar proportion. Income generated through short-term or seasonal work by Croatians abroadcame from the United Kingdom, United States (each EUR 0.2 billion) and Germany (EUR 0.1 billion), whilepersonal transfers sent by Croatians came from Germany (EUR 0.4 billion) and Switzerland (EUR 0.3 billion).Czechia turned an otherwise current account deficit of EUR 0.3 billion with the help of personal remittancesto a surplus of EUR 0.6 billion in 2018, Lithuania a current account deficit of EUR 0.5 billion into a surplusof EUR 0.1 billion. Major inflows in personal remittances to Czechia came from income generated throughshort-term or seasonal work by Czechs in Germany (EUR 1.4 billion) and Austria (EUR 0.5 billion), majorinflows in personal remittances to Lithuania came from personal transfers sent by Lithuanians from the UnitedStates, the United Kingdom and Russia (each EUR 0.2 billion).

France, Belgium and Romania could considerably reduce their current account deficit through personal re-mittances. For France and Belgium, the major share came from income generated by their residents fromborder work in neighbouring countries. For France, inflows in personal remittances came from Switzerland(EUR 11.4 billion) and Luxembourg (EUR 5.4 billion), for Belgium they came from Luxembourg (EUR 3.0billion), the Netherlands (1.5 billion) and from employment in the European Institutions (EUR 4.0 billion).Romania showed significant reduction in a current account deficit from EUR 13.1 billion to EUR 9.3 billion dueto the personal transfer inflows from Italy, the United Kingdom (each EUR 0.7 billion) and Germany (EUR 0.5billion). Similar trends apply to a smaller extent for Albania and Serbia.

8Source: Eurostat

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Figure 5: Current account and personal remittances balances in 2018 (millions EUR)Source:Eurostat (bop_rem6), (bop_c6_a)

EU citizens working abroad - Switzerland is main source of incomeBy far the highest surplus with countries abroad, EUR 22 billion, has been recorded with Switzerland, mostlydue to compensation of employee flows to Germany, France and Italy. It was followed by Norway, with a surplusof EUR 1.7 billion, mostly due to inflows to Sweden. The balance in personal remittances of the EU-28 recordedalso a considerable surplus of EUR 1.5 billion with the United States. The most prominent inflows come in thiscontext from compensation of employees by German, British and French residents working in the United States,as well as from personal transfers or workers’ remittances sent by Portuguese, Lithuanians and Bulgarians totheir home economies. As the EU-28 is, however, a net payer of personal remittances to the rest of the world,the bilateral balances of the EU-28 with most overseas partners are otherwise negative. Major net outflowswere recorded to Morocco (EUR 3.6 billion), the Philippines (EUR 1.8 billion), China (EUR 1.6 billion), Indiaand Turkey (each EUR 1.5 billion) in 2018. Net outflows to Morocco, Turkey and India were based on personaltransfers, those to the Philippines and China both on personal transfers and compensation of employees insimilar proportion (Figure 6).

Figure 6: Personal remittances of the EU-28 with the World, inbound and outbound (millionsEUR)Source: Eurostat (bop_rem6)

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Data sourcesData on personal remittances according to the BPM6 manual are currently available from dedicated tables(bop_rem6) in the Eurostat database under the balance of payments domain, with the most comprehensivecoverage starting from 2005. Personal remittances are not directly reported by Member States, but are compiledfrom the two standard components personal transfers9and compensation of employees. The online tables areavailable for each component on an annual basis and are reported by Member States by end-September eachyear with a somewhat extended geographical breakdown (Geo 5 – main world aggregates and a large selectionof countries). The EU-28 aggregates contain also confidential data as well as Eurostat estimations for missingdata. Quarterly data on personal transfers and compensation of employees are regularly collected by Eurostatas part of the quarterly balance of payments data, but with less geographical details. All disseminated data aresubject to revisions.

The World Bank publishes also annual data on personal remittances under its World Development Indica-tors. The data starting from 2005 are compiled according to the BPM6. Differences to World Bank figures(in US$) could occur from exchange rates applied, different update frequencies or in particular geographicalbreakdowns due to World Bank estimations.

ContextData on personal remittances and its components are collected on the basis of Regulation (EC) No. 184/2005of the European Parliament and of the Council of 12 January 2005 on Community statistics concerning balanceof payments, international trade in services and foreign direct investment.

Personal remittances allow to measure and analyse transactions resulting from private households’ economicactivities in other countries, either as migrant transfers to their home economies or as income gained fromemployment abroad or with non-resident entities. As both components relate to the same phenomenon, a com-bined presentation appears legitimate according to the BPM6 standard, although in the public perception theconcepts of "personal transfers", "personal remittances" and "workers’ remittances" are commonly mixed up,while it rarely connects the concept of "compensation of employees" to remittances. However, the concept ofpersonal remittances is the broadest of them, including all of the above mentioned as major elements.10

The reason for incomplete data on personal remittances lies in the considerable information asymmetries be-tween host and recipient economies and the relative insignificance of remittance flows in industrial nations intheir role as host economies. For recipient economies abroad they represent however very often a substantialsource of income (see above measures in relation to GDP and current account balance). Further, the heteroge-neous character of remittance transactions makes the compilation process more complex, thus usually having torely on a combination of resources (data collections from the financial sector, surveys on migrant or commuterpopulations, estimations based on macroeconomic modelling), depending on the availability of correspondingdata sources in the compiling economy. As a consequence there appears to be a systemic problem of under-coverage (excluding unrecorded remittances in cash and kind via informal transmission channels)11combinedwith data asymmetries, which should be kept in mind when analysing data on international remittances.

This can be illustrated by analysing intra-EU remittance flows, i.e. remittance flows between the MemberStates of the EU. In theory, intra-EU inflows (credits) should equal mirror intra-EU outflows (debits). Asym-metries, calculated as intra-EU inflows (credits) minus intra-EU outflows (debits), show positive values forpersonal transfers and mostly negative values for compensation of employees. It can be explained by compi-lation issues: personal transfers are more relevant for beneficiary countries and thus credits are higher (andpresumably of better quality), while for compensation of employees, debit data are easier to compile as theyare available from administrative sources.

9In some countries the memo item workers’ remittances is available instead of personal transfers

10For more details see in Eurostat Statistics Explained Remittances according to the BPM6 manual

11Attempts to estimate the impact of informal remittance transactions and to provide major geographical breakdowns could bebased on international migration statistics, e.g. Jiménez-Martin S./Jorgensen N./Labeaga J.M.: The volume and geography ofremittances from the EU, European Commission, September 2007

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Indeed, since 2008 some improvements in intra-EU data asymmetries can be observed, which could be at-tributed to the increasing coordination work among compilers. In 2018 EUR 67.6 billion of intra-EU inflowswere reported against EUR 70.1 billion in intra-EU outflows, thus showing a discrepancy of EUR -2.5 billion in2018, compared to a discrepancy of EUR 6.0 billion in 2008 (Figure 7).

Figure 7: Asymmetries in intra-EU remittance flows (million EUR)Source: Eurostat (bop_rem6)

The use of macroeconomic modelling has certainly increased knowledge about international remittance flowsand can address to some extent the problem of under-coverage, but unfortunately bears also the risk in diffus-ing the delineation between the included remittance components (e.g. capital transfers, net compensation ofemployees). As a result, the consideration of the components in strict interpretation of the accounting standard(BPM6) remains implicit and does not allow comparable breakdowns.

Finally, a particular interest in international remittance data is nurtured by the quest for analysing persistingglobal labour market disparities and assessing dependencies and opportunities (such as “diaspora externalities”)arising for recipient economies from this source of income12, as well as predicting its correlation to businesscycles in both host and recipient economies13.

In view of the large movements of refugees and migrants in recent years a renewed interest on internationalremittances in the context of migration evolves among European policy-makers14, emphasising the significantimpact of remittances to developing economies. For a snapshot on migration and remittances from a globalperspective the World Bank recently published a comprehensive fact book, dealing among others with statisticalissues related to the compilation of remittance data, the use of data sources, data quality issues and providingfor country tables15. Further its newsletter provides valuable updates on recent trends in migration and remit-tances16.

12 Brain Drain in Globalization: A general Equilibrium Analysis from the Sending Countries’ Perspective. In: EconomicEnquiry, Vol. 51, No.2, April 2013

13 Bettin G./Presbitero A./Spatafora N.: Remittances and Vulnerability in Developing Countries, IMF Working Paper, January2014

14 http://www.worldbank.org/en/events/2016/11/07/second-world-bank-eu-presidency-conference-on-migration-and-the-global-development-agendaMove4Dev: 2nd EU Presidency-World Bank Conference on Migration and Development, December 2016

15 https://openknowledge.worldbank.org/bitstream/handle/10986/23743/9781464803192.pdf Migration and RemittancesFactbook 2016, World Bank

16 http://www.worldbank.org/en/news/infographic/2017/04/21/trends-in-migration-and-remittances-2017 Trends in

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Other articles• Remittances according to the BPM6 manual

• Migration and migrant population statistics

Database• Balance of payments - International transactions (BPM6) , see:

Personal transfers and compensation of employees (bop_rem6)

Publications• News release - Personal transfers in the EU

Methodology• Balance of payments and international investment position manual, Washington D.C., IMF 2009, 6th

edition (BPM6)

• International Transactions in Remittances: Guide for compilers and users, Washington D.C., IMF 2009(RCG)

Legislation• Regulation (EU) No. 1013/2016 of the European Parliament and of the Council of 8 June 2016 on

Community statistics concerning balance of payments, international trade in services and foreign directinvestment

• Regulation (EC) No.184/2005 of the European Parliament and of the Council of 12 January 2005 onCommunity statistics concerning balance of payments, international trade in services and foreign directinvestment.

• Summaries of EU Legislation: EU statistics — balance of payments, trade in services and foreign directinvestment

• Commission Regulation (EU) No.555/2012 of 22 June 2012 amending Regulation (EC) No.184/2005 ofthe European Parliament and of the Council on Community statistics concerning balance of payments,international trade in services and foreign direct investment, as regards the update of data requirementsand definitions.

External links• World Bank DataBank

Migration and Remittances 2017, World Bank

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