Ukraine labor remittances drop 2% in 5M20

The remittances of Ukrainian laborers abroad dropped
2.1% yoy to USD 4.5 bln in 5M20, the National Bank of Ukraine (NBU) reported on
July 10. Around 60% of remittances were transferred through informal channels,
while the rest occurred via banking transfers and international money transfer
systems, according to NBU estimates.

The remuneration of Ukrainian laborers
abroad dropped 4.8% yoy in 5M20 to USD 4.7 bln, the NBU said.

Evgeniya Akhtyrko: The remittances
of labor migrants have been essential for Ukraine’s economy since 2015, as they
restrained the enlargement of the current account (C/A) deficit amid a negative
trade balance. Recall, due to the revision of a remittances
estimate in 2018, the NBU improved Ukraine’s C/A for
2015-2017 by about USD 2 bln p.a.

The recent drop in remittances was expected, as the
remuneration of Ukrainian laborers abroad dropped due to the quarantine
restrictions of the coronavirus pandemic. In addition, a significant part of
labor migrants had to return to Ukraine in March-April for various reasons
related to the pandemic.

We don’t expect that the decline of labor
remittances will have a significant negative effect on Ukraine’s C/A in 2020,
as this drop will be outweighed by the improvement of the trade balance.