IMF warns on exodus from eastern Europe

Posted on July 20, 2016

LONDON, ENGLAND - MAY 28: Border Force check the passports of passengers arriving at Gatwick Airport on May 28, 2014 in London, England. Border Force is the law enforcement command within the Home Office responsible for the security of the UK border by enforcing immigration and customs controls on people and goods entering the UK. Border Force officers work at 140 sea and airports across the UK and overseas. (Photo by Oli Scarff/Getty Images)©Getty

The emigration of young skilled workers from eastern Europe risks creating a vicious circle that damps the economy in their home countries and further increases the lure of richer western European nations, according to a report from the International Monetary Fund.

The exodus from eastern Europe, which the report defines as an area of 20 countries stretching from Estonia to Albania, has reduced the real growth of those countries’ gross domestic products by 7 percentage points on average, the IMF estimates. Twenty million people have left eastern Europe over the last 25 years — with eight in 10 heading for western Europe — and return migration seems to have been limited.

    Emigration from eastern Europe has exacerbated shortages of high-skilled labour and lowered productivity, the report says. At the same time, money sent home by emigrants has made recipients less likely to seek work and has increased the real exchange rate for many currencies, making eastern European economies less competitive.

    Remittances sent home by emigrants have had some positive effects, such as boosting consumption and allowing more investment, but this has not outweighed the negative impacts of emigration, the IMF says.

    If there had been no skilled emigration from eastern Europe between 1995 and 2012, the gap between these countries and the EU-wide average in terms of average income per person would have been 5 percentage points smaller, the IMF analysis suggests. The 20 eastern European countries considered in the report are a mix of EU and non-EU states.

    In 2014, income per person figures in Estonia, Lithuania, Hungary and Poland were all around 70 per cent of the average across the EU’s 28 countries, when measured in terms of purchasing power.

    “In the absence of determined and co-ordinated policies, there is a risk that emigration and slower income convergence may become mutually reinforcing,” the authors of the IMF report conclude.

    Maciej Duszczyk, deputy director of the Institute of Social Policy at Warsaw University, agreed that waves of emigration between 2004 and 2012 pose longer-term problems for Poland. Over the next 10 years, falling fertility and the earlier exodus of younger workers is expected to lead to a rapidly ageing population.

    However, Professor Duszczyk was more optimistic about Poland’s emigration trends in future years. “Most people who thought about emigration have now done it . . . I don’t expect new waves of emigration.”

    To reduce the adverse impact of emigration, the IMF suggests that eastern European countries should focus on policies that encourage migrants to return, leverage remittances to boost investment and make better use of the remaining workforce. They also suggest that some of the EU budget could be used to offset the effects of emigration.

    “There has been a lot of discussion about making a return to Poland attractive . . .[but] the disparity in incomes and in the degree of job stability for the younger generations between the developed European economies and Poland is still too large,” said Michal Myck, director of the Centre for Economic Analysis, in Szczecin.

    “The initial hope that people would leave Poland and come back after a few years with valuable experience and know-how increasingly turns out to be naive.”

    Additional reporting by Henry Foy

    You must be logged in to post a comment Login