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IMF: Eastern Europe losing out by emigration

Silver Tambur
July 23, 2016

Emigration has led to positive outcomes for migrants, and for the EU as a whole. Yet it may also have slowed growth and income convergence in the 20 Eastern European economies that were studied in the new IMF report.

https://p.dw.com/p/1JSoH

Nearly 20 million people have left the countries of Central, Eastern, and Southeastern Europe (CESEE) - from Albania to Estonia - over the last 25 years. Their reasons for doing so vary, but the majority have left their homelands seeking to improve their own well-being as well as that of their families back home. This exodus represents the largest emigration in the world in modern times in terms of the proportion of the population from the migrant countries.

A new report from the International Monetary Fund released earlier this week says that though the migration is an indicator of the success of the EU project, which sees freedom of movement as necessary for achieving greater economic integration and ultimately higher incomes, it has had an adverse impact on the countries left behind.

The widespread emigration from the CESEE regions coincides with several other socioeconomic phenomena including skills gaps, brain drain, and rapidly aging populations - as well as an influx in refugees - causing widespread disagreement on how to deal with population flows.

Brain drain

Eight in 10 of these emigrants from CESEE nations went to Western Europe, with Germany, Italy, and Spain receiving the bulk. Outside Europe, the United States is the top destination.

Many of the emigrants were young and highly skilled, more so than in other emigration waves in the past. This “brain drain” coincided with an aging population in many eastern European countries. This combined phenomenon appears to have reduced competitiveness and increased the size of government, by pushing up social spending in relation to GDP. Emigration also appears to be permanent, with indications of only limited return so far.

Emigration has also lowered potential growth in Eastern European countries, with the analysis suggesting that the real GDP growth would have been seven percentage points higher on average in the absence of emigration during 1995–2012, with skilled emigration playing a key contributing factor. And while many emigrants are sending money back home, it has made recipients less likely to seek work.

The skyline of Tallinn, the Estonian capital
Estonia has been affected by the loss of skilled workersImage: Sandy Hausman

In order to avoid people leaving, the report suggests creating a better professional environment, such as boosting job creation and modernizing education. It also encourages Eastern European countries to better utilize the remaining workforce as well as engage with the diaspora, promoting return migration.

Given the benefits of emigration for the EU as a whole, there might be scope for a pan-European initiative, the report advises. "Consideration could be given to adjusting the composition of the EU funds, for example, with a greater focus on productivity-boosting research and development and developing skill-intensive sectors, to help retain skilled workers."

Eastern Europe reluctant to adopt new immigrants

Despite significant emigration and the resulting skills gap in Eastern and Central Europe, many residents of those countries have become reluctant to accept new migrants, including refugees, than their counterparts in Western Europe.

Ungarn Premierminister Viktor Orban
Hungarian Prime Minister Viktor OrbanImage: picture-alliance/NurPhoto/K. Dobuszynski

Hungarian Prime Minister Viktor Orban has been particularly vicious, spearheading the Visegrad states' - Czech Republic, Hungary, Poland and Slovakia - battle against a common EU policy on accepting refugees. About two-thirds of the Hungarian population has expressed support for his tough stance and numerous political figures in the other Visegrad states have echoed the stance.

Across Eastern and Central Europe, far-right parties have gained popularity in a number of states. In Estonia, for example, the ultra-nationalist and populist Conservative People's Party has doubled its support since the refugee crisis began in 2015. The party is against accepting refugees or Muslims in the country and advocates the return of emigrated Estonians instead.

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