Refugees to boost economic growth in Europe

Despite the potentially positive effect on growth, leaders such as Germany's Angela Merkel have voiced the need to stem the flow of migrants. (AFP)

Despite the potentially positive effect on growth, leaders such as Germany's Angela Merkel have voiced the need to stem the flow of migrants. (AFP)

European economic growth will see an immediate boost from the unpreced­ented influx of refugees, an International Monet­ary Fund (IMF) study states, handing a silver lining to leaders such as German’s Chancellor Angela Merkel attempting to untangle the crisis.

Gross domestic product (GDP) in Germany alone, which has received about one million refugees, could expand by as much as 0.3% in 2017, according to the study published on Wednesday. The advantages will continue as long as Merkel and her fellow European Union leaders can get migrants into jobs by improving labour-market flexibility.

“The negative effects of immigrant surges tend to be short-lived and temporary,” said the IMF’s Enrica Detragiache, one of the report’s authors. A positive effect “should be quite immediate” thanks to the “fiscal expansion that’s being carried out to provide for the refugees”, she added.

The aggregate GDP across the 28-nation EU will rise by 0.13% in 2017 relative to the baseline scenario because of the migration trends, the study found.
With the German chancellor’s popularity at its lowest level since 2011 and European politicians warning of threats to the region’s social structure and passport-free travel, the IMF study shows it’s crucial for governments to get migrants into jobs to reap the economic benefits from the largest influx of refugees to Europe since World War II.

According to the IMF’s simulation, GDP in the three countries that welcomed the largest number of refugees last year will increase in 2017 – by 0.3% in Germany, 0.4% in Sweden and 0.5% in Austria relative to the baseline scenario.

If governments can ensure migrants successfully integrate into the jobs market, the level of GDP could be as much as 1.1% higher than the baseline in the three main destination countries by 2020, the study showed.

“There will be a huge challenge to try to bring the skills the refugees can bring to the labour market in line with the demands of industry,” Detragiache said.

Despite the positive effect the influx may have on economic growth, leaders including Merkel, Sweden’s Stefan Löfven, Austria’s Werner Fay­mann and the Netherlands’ Mark Rutte have voiced the need to take steps to reduce numbers and stem the flow.

“The current numbers are not sustainable,” Rutte told the European Parliament in Strasbourg on Wednesday. “We are running out of time.”

As refugees keep arriving, Ger­many is pressing partners such as Greece to do more to secure the bloc’s outer border and to fulfil an EU pledge of €3-billion in aid to Turkey. Otherwise Europe’s passport-free travel system could be at risk as governments take matters into their own hands and reinstall border checks.

Merkel is to host a summit with Turkish government leaders later this week. Amid open revolt within her Christian Democratic Union ranks, party leaders on Monday backed changing asylum rules to make it easier to expel citizens of Algeria, Morocco and Tunisia.

Although the IMF study’s authors caution that their figures are tentative because the exact numbers of asylum seekers coming to Europe cannot be accurately predicted, they say the provision of support services to refugees, such as housing, health and education, would increase aggregate demand in the short term, which, with supportive monetary policy, “would help compensate for possible downward pressures on wages and inflation associated with the gradual entry of refugees into employment”.

“Quick labour market integration can unlock the potential economic benefits of the refugee inflow,” the authors say in the report. – © Bloomberg

Client Media Releases

Registration continuing smoothly at UKZN
ITWeb BI summit announces four tracks
Heightened risk will characterise 2019
Study options if you performed better than expected