Remittances to Moldova spike in May amid lockdown relaxation in Europe

Remittances to Moldova spike in May amid lockdown relaxation in Europe
By Iulian Ernst in Bucharest June 25, 2020

The volume of gross transfers from abroad to Moldovan households (remittances) increased by 22% y/y to $142mn (€130mn) in May, which is the highest value since 2014, Moldova’s National Bank (BNM) reported. In net terms, the remittances increased by 25% y/y to $135mn.

The robust increase is likely to reflect payments delayed during the lockdown period and they indicate that even if the overall remittances during the coronavirus crisis are likely to decline due to economic hardship, they will continue since workers abroad are anyway in a better financial position than their families home that are equally hit by the crisis.

In May, half of the money received by Moldovan households came from the European Union, 13.6% came from the Community of Independent States (CIS) and the remaining of 36.3% from other states, according to the BNM data. The transfers from Italy alone were 16.7% of the total. Germany accounted for another 11.9% of the transfers, followed by France (6.2%).

However, nearly 72% of the money transfers carried through official channels (86% of total gross transfers in May) were denominated in euros. The transfers from the UK (significant and not included in the EU27) might explain part of the higher share of transfers expressed in euros since GBP bank accounts in Moldova and GBP international transfers are less common. 10.1% of transfers were denominated in US dollars and 2.2% in Russian rubles. A significant share of 16.1% was denominated in the local Moldovan currency.

During March and April, the remittances to Moldovan households decreased by double-digit rates to around $100mn per month, after the movement restrictions firstly in Europe and then in Russia were imposed.

The recovery in May put the overall remittances in March-May roughly at $342mn, roughly at the same level as in the same three-month period last year.

The relaxation in Europe pushed the remittances denominated in euros to Moldova up by 40% in May compared to the same month last year — to €93mn from just over €60mn in each of the previous two months. In fact, the money transfers denominated in euros contracted only marginally in March and April, but this was a visible change of the trend after they posted annual growth rates of over 20% y/y in the previous months.

In contrast, the money transfers denominated in US dollars contracted by 11% y/y to $14.3mn in May after a 31% y/y plunge in April and 25% y/y decline in March.

On a long-term perspective, it is visible that the transfers denominated in euros doubled to around $60mn from 2014 to 2020, while the transfers denominated in US dollars (mainly coming from CIS, but also Israel and possibly other countries) decreased three-fold to $10mn.