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International Monetary Fund

output contraction and massive job losses. When hit by the 1998 crisis, many workers did not have any other viable alternative than to seek job opportunities abroad to support their families. This emigration trend has intensified, and in 2003 the total officially-estimated gross inflows of workers’ remittances reached almost 25 percent of GDP, up from 5 percent of GDP in 1996 ( Figure 1 ). This is very large compared to most other countries, including in the Commonwealth of Independent States (CIS) and in Central and Eastern Europe (CEE), where remittances

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

central to addressing the main policy issues associated with labor migration and workers’ remittances. Recognizing that much of the impetus for migration stems from poor economic and social conditions at home, the first order of the reform agenda should be to aggressively tackle impediments to faster economic growth and private investment and address more effectively social needs of the population through better-targeted social spending programs. To moderate, and eventually reverse, the current emigration trend and Moldova’s increasing dependence on workers’ remittances

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

Labor migration and remittances, which have increasingly become a part of the global landscape, have profound economic and social consequences. Moldova, a small low-income country where an estimated one-third of the economically active population has been working abroad, is an interesting illustration of this trend. Drawing on household survey data, this Special Issues paper explains why Moldovan workers go abroad and how their remittances are used. With this background, it provides insights into policy challenges of coping with, and maximizing benefits from, international labor mobility and the large inflows of remittances.

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

sense, a greater choice of employment opportunities, both at home and abroad, available to Moldova’s workers is welcome. Moldova’s problem today, however, is that much of the impetus toward migration stems from the lack of opportunities at home. Appropriate macroeconomic policies are important, but will be effective only if underlying structural weaknesses are addressed. To limit and possibly reverse the upward emigration trend and the increasing dependence on workers’ remittances, establishing a good business environment is crucial. It would both attract foreign

International Monetary Fund

’ renewed push for structural reforms and underscored their importance to sustain the economic revival and maintain external competitiveness. They stressed the importance to improve the environment for private initiative and investment also by reducing licensing and registration requirements and other administrative barriers and strengthen the legal and institutional framework and governance. They encouraged the authorities to accelerate implementation of the structural policies envisaged in their EGPRSP to encourage investment, reverse the current emigration trend, and

International Monetary Fund. European Dept.

importance and their commitment to maintain youth and skilled labor in the domestic labor market, prevent a continuation of emigration trends, and improve the quality of education. EU Integration North Macedonia has made important steps and remains devoted to continue on the EU integration path . After the Prespa agreement with Greece, the country achieved two major milestones at the start of the pandemic: the country joined NATO as its 30th member country, and the EU Council agreed to start accession negotiations. However, no specific date has been set yet, as

International Monetary Fund

. They noted that structural reforms have stalled, and urged the authorities to speed up implementation of the structural policies envisaged in their Economic Growth and Poverty Reduction Strategy, with a view to encouraging investment, reversing the current emigration trend, and channeling remittances into productive use. This will need to involve decisive efforts to reduce government intervention in the economy, revamp the privatization process, phase out excessive regulation, and reform the public sector, with a view to improving service delivery. While the recently

International Monetary Fund

. Under the latter approach, families send one of their members abroad to supplement the income lacking in the home country. Developments in 1997-98 can be analyzed under this approach. Remittances declined during the pyramid crisis (1997) but picked up in 1998. In response to the crisis, families sent one or several members abroad, causing remittances to surge during the following year. 10. The growth of remittances in Albania broadly follows emigration trends . Based on official balance of payments data, remittances have increased from US$150 million in 1992 to

International Monetary Fund
This Selected Issues paper analyzes the macroeconomic impact of workers’ remittances on Moldova. The paper focuses on Moldova’s labor emigration since the late-1990s using survey data designed to shed light on the economic and social consequences of migration. The survey results are broadly consistent both with the findings from balance-of-payments data and with the stylized facts in the labor migration literature. The paper also examines various indicators to assess the appropriateness of the current exchange rate level.
International Monetary Fund. European Dept.
The economy is rebounding. After a 6 percent drop in 2020, real GDP is projected to grow at 4 percent both in 2021 and 2022, reflecting improved mobility, a return of the diaspora, and continued policy support. With uncertainty remaining high, including about the course of the pandemic, policies need to be kept flexible. Emphasis should be on limiting the economic scars from the pandemic crisis while making progress on long-standing reform priorities such as further strengthening public financial management and revenue administration and buttressing the financial safety net.