IMF lists countries most affected by Russian economic downturn

Due to the "sanctions war" between the West and Russia, as well as falling oil prices, the countries of Central Asia may suffer from outflow of investment and destabilization of their economies, Russian newspaper Vedomosti reported referring to a report from Minchenko Consulting Communication holding.

The countries most affected by the sanctions imposed against Russia are Kazakhstan, Kyrgyzstan and Tajikistan, according to the report. Other risks for the Central Asian region are the withdrawal of the international troop contingent from Afghanistan and the actions of the Islamic State terrorist group, the report says.

Former Soviet Union countries have been adversely affected by the economic downturn in Russia and the devaluation of ruble, according to Charles Robertson, an economist at Renaissance Capital. The most negative impact from the ruble depreciation will be seen in Tajikistan, Kyrgyzstan and Uzbekistan, he predicts.

According to the World Bank, remittances from Russia account for 42% of Tajikistan's GDP, 25% in Moldova, 21% in Armenia, 31.5% in Kyrgyzstan, 12% in Uzbekistan, 12% in Georgia, and 2.5% in Azerbaijan . According to the IMF, if the negative economic trends in Russia continue, the countries in Central Asia may incur losses of more than $15 billion.

Slowing economic growth in Russia will badly affect primarily countries that import oil and gas (Armenia, Georgia, Kyrgyzstan and Tajikistan) as opposed to exporting countries (Kazakhstan, Uzbekistan, Turkmenistan and Azerbaijan). The reduction of Russia's GDP by 1% will reduce the flow of remittances to the countries in Central Asia by 5%, analysts Bank of America Merrill Lynch have stated. According to the National Bank of Kyrgyzstan, due to the devaluation of the ruble, the net inflow of remittances in Kyrgyzstan declined in 2014 to $1.8 billion, as compared to $1,9 billion in 2013.

However, there are some positive effects of the sanctions, experts from Minchenko Consulting believe. There may be resumed interest in the Economic Belt of the Great Silk Road project (Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan), as well as the Nabucco pipeline project and the TAPI (Turkmenistan, Afghanistan, Pakistan, India) economic grouping.

But with the Russian economy weakening, there will be also increased regional dependence on China, experts warn.