During the first two months of 2023, the growing trend of inflow of remittances continued, which began in the record year of 2022, when income from personal transfers in the country’s balance of payments exceeded five billion euros, according to data from the National Bank of Serbia (NBS).
There are various reasons for the increase in the nominal value of remittances, but one of the key factors is inflation, which “pushed” up the salaries of our people abroad, as well as the costs faced by their families in the country. In the Biznis.rs research, we also deal with the question of how remittances arriving in Serbia are spent.
In January and February of this year, the inflow of remittances to Serbia amounted to 731.3 million euros, which represents a year-on-year growth of 29.5 percent, the NBS told us. In 2022, the inflow based on remittances reached 5.028 billion euros and increased by 38.3 percent compared to 3.635 billion euros recorded in 2021.
Our central bank points out that, when we talk about the factors that influenced the growth of remittances, we should keep several things in mind.
“First, remittances normally have a countercyclical character – which practically means that in periods of crisis, increased global uncertainty and geopolitical tensions, their growth usually occurs. Practically, people living abroad are more likely to help their family members and friends in such circumstances. Second, the growth of inflation in all countries led to the fact that all key macroeconomic indicators, including remittances, increased nominally. Finally, the growth of remittances is also influenced by the increased number of citizens of other countries who establish their residence in Serbia”, the NBS points out.
When asked if they expect that this year will break the record in inflow set in 2022, the National Bank of Serbia answered that their projection is that the level of remittances will remain high in 2023 as well.
“We expect, however, that the year-on-year growth rate will decrease in the coming months due to the high base reached in the second quarter of 2022,” said the NBS.
The larger the diaspora, the more remittances arrive
Nenad Jevtović, director of the Institute for Development and Innovation (IRI), in an interview with Biznis.rs, confirms that inflation is certainly one of the key reasons why remittances are nominally growing, but he also points to the broader picture behind that trend.
“The reason is that our diaspora is getting more and more numerous, so an increasing number of people are sending money to their mother country. Many families function in that the father or mother works in EU countries, from Slovenia, through Austria, Germany, the Netherlands or France, and they send money to the rest of the family in Serbia. There are many more such families today than five or 10 years ago,” says Jevtović.
He reminds that a little more than”five years ago, IRI estimated that at least 15,700 people emigrated from Serbia annually, based on its own research. In the same period, the OECD estimate of 46,000 “emigrants” was used in public, which included those who went abroad for temporary work for three months, then returned to the country.
“For us, the results of the last census are the best confirmation of our work. They showed that in the period from 2011 to 2022, between 25,000 and 30,000 people annually emigrated from Serbia. Such developments point to the conclusion that the level of remittances will continue to grow in the coming years, but not indefinitely, for a simple reason – people who emigrated will no longer have anyone to send money to in Serbia,” warns Jevtović.
According to him and IRI’s assessment, the decade after 2000 was marked by transition, the next by foreign direct investments, while the decade until 2030 will be marked by migration, not only in the form of people leaving Serbia, but also arrival and immigration to our country.
How are remittances spent?
In an interview with Biznis.rs, Jevtović pointed out that the structure of spending on remittances in our country is fairly constant, as well as that data from the International Monetary Fund indicate the same – that 67 percent of the money sent by the diaspora to the mother country goes to consumption, 24 percent to real estate, and only one percent in investments.
“So, two-thirds of the money is used to ‘survive’ the month, and therefore I would not expect any changes in the structure of consumption. Our people go abroad to be employed, not to create their own businesses. When it comes to growth of GDP, creating new jobs and introducing new technologies, for that we will continue to have to rely more on foreign direct investments”, believes Jevtović.
When it comes to measures that would better connect the economic potentials of the diaspora and the motherland, Jevtović suggests two directions.
“One is the measures aimed at younger, highly educated emigrants, who are ready for circular migration or return to Serbia. For that target group, there are already well-designed support programs that are well implemented by colleagues from the organization ‘Point of Return,’” says Jevtović.
IRI sees another opportunity in designing services for our citizens over 60, who would like to return and spend their retirement days in Serbia, which they saved for during their working life.
“It is a ‘niche’ for which incentives should be designed, including the adjustment of our health system so that it can provide quality services at an appropriate price. It would be a kind of health tourism, and it could be done in a relatively short period of time,” concluded Jevtović.
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