Mass migration to have a positive economic impact, says LGIM
Legal & General Investment Management (LGIM) predicts that the inflow of highly educated migrants into a country with full employment is likely to have a positive impact on long-term growth prospects.
The civil war in Syria and ongoing difficulties in other parts of the Middle East have prompted a humanitarian crisis and one of the biggest movements of people since the Second World War, with most migrants seeking refuge in Germany. In this month’s Fundamentals briefing, European Economist Hetal Mehta (photo, above) discusses the impact of the migrant influx in terms of the short-term fiscal cost for Europe, the possible longer-term economic impact and other risks relating to the crisis.
Hetal explains: “by the end of 2017, we estimate that the recent wave of migrants will add 2% to the German population and boost the labour force over time .”
“An Organisation for Economic Cooperation and Development study assessing the net fiscal impact of cumulative migration over the past 50 years found that the average impact was zero, and usually within 0.5% of GDP in either a positive or negative direction”.
Commenting on the short-term fiscal impact, Hetal says: “the German economy is in healthy shape, so the spending on refugees should be easily accommodated without much deterioration in the deficit. Furthermore, any additional spending from Germany would be welcomed by the rest of Europe.”
The rapid influx of migrants has, however, given rise to nationalist parties and anti-immigration sentiment in a number of European countries, raising questions of social cohesion and political stability.
“With the next 18 months set to see a number of national elections in major countries, the potential ramifications are significant. However, given the largely favourable characteristics of the current migrant flow, we would anticipate a positive economic impact,” Hetal concludes.
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Notes to editors:
LEGAL & GENERAL INVESTMENT MANAGEMENT:
Legal & General Investment Management is one of Europe’s largest asset managers and a major global investor, with total assets of £757 billion*. We work with a wide range of global clients, including pension schemes, sovereign wealth funds, fund distributors and retail investors.
Throughout the past 40 years we have built our business through understanding what matters most to our clients and transforming this insight into valuable, accessible investment products and solutions. We provide investment expertise across the full spectrum of asset classes including fixed income, equities, commercial property and cash. Our capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions.
*as at 31 December 2015, including derivative positions and advisory assets.