ASTANA – Remittances to Central Asia, Eastern Europe and the Caucusus have fallen to 2009 levels, impeding the growth rates of Central Asian economies, according to a May 14 press release from the European Bank for Reconstruction and Development (EBRD).
“[D]eep recession in the Russian economy, which we now project to contract by 4.5 per cent in 2015, is having larger-than expected negative spill-over effects on countries that have strong economic links with Russia,” the EBRD’s latest regional economic prospects report, issued during the bank’s annual meeting in Tbilisi from May 13–15, reads.
The EBRD calls the rate at which remittances from Russia are falling “alarming,” and has scaled back its forecasts for economic growth in Central Asian states, including Mongolia, partially as a result of this drop. EBRD data from the first quarter of 2015 suggests that remittances are falling at rates equal to or faster than those during the global economic crisis in 2009, with the trends predicted to continue through the rest of the year.
The decline in remittances results from the weak rouble as well as the return of significant numbers of migrants to their home countries, the EBRD report says, including the hundreds of thousands of migrants reported to have returned to Tajikistan, Uzbekistan and Kyrgyzstan. Tajikistan is consistently rated the world’s most remittance-dependent country, with 49 percent of its gross domestic product estimated to come from remittances, primarily from Russia, where nearly half of its men of working age travel to labour, according to an April 21 Eurasia.net report. Kyrgyzstan, the world’s second most remittance-dependent country, is estimated to rely on remittances for about a third of its economy. Kyrgyz workers may also be returning home from Kazakhstan, the EBRD reports, because of Kazakhstan’s slowing growth.
“Migration on this scale poses the significant challenge of how to absorb the returning workers into the domestic economy,” the EBRD annual report reads. “In the short term, this requires additional government resources for health care, social protection and law and order, although returning migrants may bring some savings back with them. In medium term, the challenge is to tailor education and skills mix in a way that supports the effective use of labour resources at home. This can become an urgent matter in a geopolitically sensitive region.”
The deceleration of growth in Central Asia is “mainly due to external shocks,” the EBRD report said. These include the falling remittance rates, lower export demand and declining consumer and investor confidence. However, the economies of Central Asia are still expected to grow more strongly than other regions in the EBRD report, with a projected average expansion of 3.7 percent in 2015 and 4.1 percent in 2016.
Kazakhstan’s economy is predicted to grow by 1.5 percent this year and 2 percent in 2016. The bank originally lowered forecasts of the country’s growth rate in January, and this prediction remains unchanged. The economy in Kyrgyzstan is predicted to grow by 3 percent in 2015 and 3.1 percent in 2016, in Mongolia by 4 percent in 2015 and 3 percent in 2016, in Tajikistan by 3.8 percent this year and the same in 2016, Turkmenistan by 9.5 percent this year and 10 percent next year, and Uzbekistan by 7 percent this year and 7.2 percent next year.