TIRANA, July 5 – Migrant remittances continue to have a huger than officially reported role in Albania’s economy, but high transfer costs and complicated procedures lead to about 40 percent of them flowing into the country through informal channels in cash.
A detailed report by Albania’s central bank has shown that an average of about €1.15 billion in annual remittances has flown into the country during the past decade, accounting for 12 percent of the Albania’s GDP and representing almost the same of what has flown in foreign direct investment.
The figures are considerably higher from what is officially reported on the country’s balance of payments where remittances from about 1.2 million Albanian migrants, mainly based in Italy and Greece, have been on a downward trend since the outbreak of the global financial crisis in 2008.
Financial flows into and out of the country published by the central bank in its balance of payments show migrant remittances slightly increased in 2017 when they recovered to €636 million, up from €616 million in 2016, but yet were about a third below their peak level of €952 million in 2007 just before the onset of the global financial crisis.
Meanwhile, the newly published report which apparently also takes into consideration remittances flowing through informal channels, shows total remittances sent to Albania in 2017 slightly dropped to €1.15 billion, of which €872 million in personal transfers from migrant income and another €286 million in income from seasonal migrant workers.
Albania’s central bank estimates that 39 percent of remittances to Albania flow through unregulated channels, 57 percent through non-bank financial institutions, mainly money transfer operators, and only 4 percent through banks, with high transfer costs and perceived complicated procedures as the main reasons behind such situation.
Bank of Albania experts say that cash disbursements even in cases of remittances flowing through official channels, promote the use of physical money in the highly cash-based Albanian economy, increasing costs for both service providers and remittance recipients by an estimated total of about 1.5 percent of Albania’s GDP.
Albania has about 1.2 million migrants, about 40 percent of its current resident population, making it one of the countries with the highest per capita migration rates around the world. Around 1 million Albanian migrants live in Italy and Greece, the two neighbouring countries where Albanians massively moved to in the early 1990s following the collapse of the country’s communist hardline regime and almost five decades of isolation. The two neighbouring countries, each hosting about half a million Albanian migrants, account for 80 percent of remittances flowing into the country.
The Bank of Albania has earlier warned the country’s rapidly ageing population as a result of massive immigration and lower birth rates are expected to have a negative impact on the country’s growth in the next five years.
While Albania has partly benefitted from remittances and migrant know-how and investment, brain drain has been huge and polls show one out of two Albanians would be willing to move abroad if they were given a better opportunity.
Migrant remittances have been a key source of income for Albanian households in the past quarter of a century of transition to democracy and a market economy, especially for poorer northern and northeastern Albanian regions.
At an average of 9 percent of Albania’s GDP during the past decade, remittances have accounted for a third of the country’s exports and almost the same to annual FDI inflows.
High costs
High transfer costs are one of the main reasons behind the high levels of informal remittance flows in the country. Other reasons include a perception of complicated procedures and lack of access to banking services.
Costs for sending remittances to Albania are at 9.4 percent of the amounts transferred, compared to a regional average of 7.2 percent, the central bank said in late 2017 when it called on the country’s money transfer operators and banks to reduce costs and redesign services targeted for remittance recipients.
The average cost of sending remittances to Albania in the first quarter of 2018 is estimated to have dropped to 8.64 percent of the amount’s value, standing above the Europe and Central Asia average of 7.55 percent.
While transfers through money transfer operators and banks dominate the transactions, cash transfers via informal intermediaries or ATM cash withdrawals abroad and carrying cash when travelling back home are still considered at high levels.
The World Bank estimates that remittances contribute to 13 percent of annual budget for recipient households.
In addition to crisis impacts, experts say remittances will continue to decline because of social factors as most immigrants create their own families abroad and often even take their parents with them.
