IMF Says Refugee Influx Could Provide EU Economic Boost
TEHRAN (Tasnim) - The recent influx of refugees into Europe is likely to raise economic growth slightly in the short term – mainly in Austria, Germany and Sweden – and could deliver a bigger long-term economic boost to the EU if refugees are well integrated into the job market, IMF said Wednesday.
The Washington-based International Monetary Fund described the surge in refugees from Syria and other conflict zones as a “humanitarian catastrophe” with important ramifications across the Middle East, Europe and beyond. The number of asylum seekers arriving at EU borders is unparalleled in recent times – in the first 10 months of last year, 995,000 first-time asylum applications were submitted to EU countries, more than twice the number over the same period in 2014, the 50-page report said.
The fund said this is likely to result in a “modest increase in GDP growth” in the short term, due to higher state spending on housing and benefits for asylum seekers, as well as a boost to the job market from the newcomers.
Austria, Germany and Sweden, which have been taking in most of the refugees and have low unemployment rates, will see the biggest economic impact.
GDP in the EU as a whole could be lifted by 0.05%, 0.09% and 0.13% in 2015, 2016 and 2017 respectively. The IMF estimates the largest impact in Austria, with GDP rising by 0.5% by 2017, followed by Sweden (0.4%) and Germany (0.3%).
In the long run, the economic impact could be larger, but will depend on the integration of refugees into the labour market. Assuming this is successful, by 2020 the level of GDP could be 0.25% higher for the EU as a whole, and between 0.5% and 1.1% higher in Austria, Germany and Sweden, the IMF estimates.
“Rapid labour market integration is key to reducing the net fiscal cost associated with the current inflow of asylum seekers. Indeed, the sooner the refugees gain employment, the more they will help the public finances by paying income tax and social security contributions,” the report said, Guardian reported.
The authors said government spending on the refugee crisis should be taken into account when looking at fiscal targets, for example, Greece.
Confounding widespread fears, the IMF said most immigration studies showed that the effect of new arrivals on domestic workers is usually small, possibly because they are in different segments of the job market or because of a rise in investment in response to a sudden surge in workers. Enrica Detragiache, one of the report’s lead authors, said: “By and large the negative effects tend to be short-lived and temporary.”
She also said the analysis had not found a “tipping point where we say the inflows [of refugees] are so large that the economies cannot accommodate them any more.”
Germany’s open-door refugee policy recorded 1.1 million refugees arriving last year, by far the highest number in the EU. Alexander Dobrindt, its transport minister, said this week that Germany must close its borders if the number of new arrivals does not drop soon.
The IMF called on EU governments to help refugees into the job market by easing restrictions on taking up work during the asylum application. Other suggestions include wage subsidies to private employers and temporary exceptions to minimum or entry-level wages, as well as startup funds for immigrant entrepreneurs.
Reducing restrictions on refugees’ mobility would allow them to move to where there is a high demand for workers, the IMF said. It raised the possibility that the most recent wave of asylum seekers are better educated than those in the past, with 21% of Syrians who arrived in Germany in 2013-14 having post-secondary education, close to the German average (23%).
When asked about whether the recent arrivals will be able to fill skill gaps in Germany, Detragiache cautioned: “It would be naive to think that the refugees at the moment have those particular skills. The challenge is to provide the type of training that is required and that will take some time.”
The IMF noted that the Swedish introduction programme, which includes language training, employment preparation and basic knowledge of Swedish society, has helped refugees achieve high rates of employment, although it is a lengthy process.
Germany has a higher share of foreign-born population than the UK or the US after previous immigration waves in the 1960s and 1990s, the report noted. While the gap narrows over time, in the long run the unemployment rate remains 3 percentage points higher among immigrants.