In 2022, the economies of the Central Asian countries demonstrated their stability in an unstable geopolitical situation (Russia’s war with Ukraine), and in 2023, active growth continued. Leading regional economist of the EBRD, Eric Livni spoke about this and the general picture of economic development, prospects for the Central Asian region and its features at the international conference “Asia Grains&Oils Conference in Tashkent 2023”.
“The main challenge the economies of all Central Asian countries facing today is the uncertainty regarding borrowing costs, inflation and energy/commodity prices. However, international trade, fueled by demand from Russia and elevated commodity prices, remains a key driver of growth in Central Asia,” said E. Livni.
He noted that the region benefits from the war in Ukraine, no matter how cynical it may sound, which is reflected in trade flows. In particular, in Central Asia, both import and export increased, especially exports to the Russian Federation. Trade flows have been helped by a steady fall in shipping prices. Also, exports from Turkey to Central Asia increased by about 2.5 times.
“There is a huge increase in exports of products from Germany to Armenia, Uzbekistan, Kyrgyzstan and Kazakhstan, while supplies of German products to the Russian Federation have decreased significantly, which is rather revealing,” the expert noted.
According to E. Livni, Central Asia has taken on a large role in Russia’s “intermediary trade” with Turkey and China.
Thus, among the main features of the last 2 years, the expert highlighted:
- In 2022, labour migration from CA to Russia and money transfers in the opposite direction reached unprecedented levels.
- The volume of money transfers to Central Asia skyrocketed on “banking tourism”, increasing deposits and boosting banking sector profits.
- Kazakhstan has seen an almost x7 increase in money transfers from Russia (from a relatively low base).
- Labour remittances increased on very strong demand for Central Asian workers.
- Uzbekistan has seen a 110% increase in remittances, bringing them to more than $16.9bln or 23% of GDP. In H1 2023, remittances declined by more than 20% y/y reflecting high base.
Also, E. Livni noted that Central Asian currencies traded at below their pre-war values vs. the Russian rouble for much of 2022, increasing the value of remittances in local currencies. However, in 2023, the value of remittances in local currencies decreased amid the rouble’s devaluation.
Among the positive factors for the economies of Central Asian countries, the analyst noted the following: the migration of companies and people to Central Asia (mainly to Kazakhstan) from the Russian Federation, the opening of China after the pandemic. Among the negative ones: sanctions, interruption of transit flows due to the escalation of the war in Ukraine, as well as the “fragile” political situation in the Central Asian countries.