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Ukraine’s Conflict to Shrink Economic Growth in Central Asia and the Caucasus

The conflict in Ukraine will negatively impact not only the countries involved in it, but on the wholeregion.

Geopolitical tensions over the situation in Ukraine and Western sanctions have a negative impact on the economic situation not only in Russia but also in other countries of the former Soviet Union.

“It is expected that economic growth in the countries of the Caucasus and Central Asia will slow down. If in 2013 it amounted to about 7%, in 2014-2015 it will be only 5.5%. The main reason for what is happening is a slowdown in economic growth in Russia, increased geopolitical risks, as well as weak demand in these countries,”- said the representative of the International Monetary Fund (IMF)  Natalia Tamiris.

In particular, the IMF speaks about the weakening of local currencies, rising inflation and food prices.

Experts remind that  the economies of the Caucasus and Central Asia are still largely dependent on Russia’s demand for their products and the money that labor migrants transfer to their families from Russia. In the near future this dependence will have a negative impact on their financial climate, because the forecasts do not yet presage changes for the better.

“If Russia’s economic growth slows down in the future, the flow of remittances will further weaken, exports from the counties of the  region will reduce as well as  investment in their economies. Aslowdown in other emerging markets such as China should also be taken into account. This factor willalso have a negative impact on exports from Central Asia and the Caucasus,”- says Tamiris.