The National Bank of Ukraine (NBU) has improved the methodology for calculating personal remittances to Ukraine for 2015-2017. The revision is associated with compilation of new data confirming changes in migration flows of Ukrainian employees for the last three years.

The main source of data for calculating private hryvnia remittances are reports on remittances delivered through official means such as banks and international payment systems, as well as survey findings enabling assessment of the scope of unofficial remittances both in cash and in kind.

In 2015-2017, remittances from countries with the biggest remittances flows were understated due to series of factors.

First, these years Poland became the main destination country for Ukrainian migrant workers. Since labor migration to Poland is primarily of a seasonal nature, most migrants bring in their earnings themselves. Thus, confirmation of payments are required from Polish unofficial sources.

Second, administrative restrictions on using international payment systems between Ukraine and Russia has produced a decrease in official remittances from Russia and resulted in underestimation of unofficial remittances calculated as a proportion of unofficial remittances to official remittances.

The NBU now can make more accurate estimates of personal remittances to Ukraine due to emerging data on labor migration from Ukraine based on the survey of the State Statistics Service of Ukraine, as well as the scope of personal remittances to Ukraine, including the scope of personal remittances to Ukraine estimated by the central banks of Poland and Russia. For example, according to preliminary NBU estimates remittances from Poland to Ukraine through official and unofficial channels in 2017 accounted for USD 1,350 million, while according to the final NBU estimates based on the data provided by Narodowy Bank Polski (NBP) this amount is twice as high and makes USD 3,123 million.

Considering the drastic changes in migration flows, the NBU improved the methodology for estimating personal remittances. Previously additional calculations of unofficial sources were based on the gross rates for country groups. Henceforward, for countries with the biggest remittances flows (Poland and Russia) so called ‘mirror statistics’ will be used on remittances to Ukraine, i.e. balance of payments data of the central banks of Poland and Russia. Furthermore, individual rates based on relevant findings will be calculated for 18 countries associated with the biggest inflows of personal remittances to Ukraine.

Consequently, the new methodology will sufficiently improve quality and accuracy of estimates of personal remittances, and balance of payments respectively. Preliminary data of balance of payments regarding personal remittances published at the end of each month according to results of the previous month, as well as each quarter will be calculated by the NBU based on in-house estimates taking into account all available information. In its turn, refined data in conjunction with the mirror statistics will be published quarterly within three months after the release of preliminary quarterly data. (For more details see the schedule for sharing external statistics).

Based on the revised methodology the NBU recalculated quarter and annual personal remittances over the last three years. Therefore, the estimates increased as follows:

• in 2015 - by USD 1.8 billion to USD 7.0 billion;
• in 2016 - by USD 2.1 billion to USD 7.5 billion;
• in 2017 - by USD 2.0 billion to USD 9.3 billion.

Respectively, this improved the current account of balance of payments:

• in 2015 - the deficit of 0.2% GDP improved to the surplus of 1.8% GDP;
• in 2016 - the deficit of 3.7% GDP reduced to 1.4% GDP;
• in 2017 - the deficit of 3.7% GDP reduced to 1.9% GDP.

The overall balance of payments remained the same due to mirror adjustment of the financial account.

Revised data will be taken into account for compiling new macroeconomic forecasts to be released in the Inflation Report (April 2018).

For more details on the revised methodology see Recalculating Personal Remittances to Ukraine for 2015-2017 Presentation.