The war between Russia and Ukraine created a lot of geopolitical turbulence and a series of problems in the global economy. Since the war began, the prices of energy and agricultural products have started to rise. raise. Instability in the global economy has different effects in different regions. One of the most important regions affected by the war between Russia and Ukraine is Central Asia.
In general, the attitudes of the peoples of Central Asia towards the war between Russia and Ukraine are mainly negative. For example, a question in Central Asia Barometer (CAB) Wave 11 survey, which was carried out in May-June 2022, asked: “Do you think that the situation in Ukraine will have a positive impact on our country, a negative impact or no impact at all?”
Among respondents from Kyrgyzstan, 36 percent and 34 percent said the war will have a somewhat negative or very negative impact on their country, respectively. In addition, 35 percent and 20 percent of Kazakh respondents also responded that the war will have a somewhat negative or very negative impact on Kazakhstan.
People are mainly concerned about how the war will affect their daily life and purchasing power. High prices in Central Asia have already impacted public opinion in Central Asian countries. According to the CAB Survey Wave 11 question, “Would you say you were very concerned, somewhat concerned, somewhat unconcerned, or very unconcerned about high prices in our country?” 32.4 percent and 29.3 percent of respondents from Uzbekistan said they were very worried or somewhat worried about high prices, respectively. Similarly, 68.7 percent and 25.2 percent of respondents from Kazakhstan say they are very or somewhat concerned about high prices.
One of the main concerns of the inhabitants of Central Asia is related to the increase in the prices of basic necessities, such as food, clothing, gasoline, etc. According to the CAB Survey Wave 11, 18.6% and 24.8% of respondents from Uzbekistan and Kyrgyzstan think that one of the negative consequences of the war will be the increase in the prices of basic necessities.
People’s opinions about rising prices reflect reality. Since the beginning of the war, the cost of living in the region has increased due to inflation. According to the European Bank for Reconstruction and Development (EBRD), the regional inflation rate remains at 16 percent.
Energy and food make up a large part of household consumption. The prices of agricultural products rose after the Kremlin imposed a ban on grain exports to members of the Eurasian Economic Union. In addition to food prices, high gasoline prices negatively affect households and increase living costs. Gas plays an important role in the energy mix of Central Asian countries, especially Uzbekistan Y turkmenistanwhere high prices directly affect the welfare and purchasing power of people.
The recent dramatic influx of Russians to Kazakhstan and Tajikistan, in particular, is creating mixed effects for locals. For one thing, Russians generally have significantly higher incomes than the local population and can contribute to the economy. increase; on the other hand, they can cause more inflation and lead to additional increases in the price of food, real estateand rent that have a negative effect on the premises.
Remittances are a particular concern. Seasonal migration a Russia provides a significant livelihood for Central Asian households due to more competitive incomes in Russia. In this context, Russia is the first choice of people from Central Asia for seasonal migration. According to CAB Survey Wave 11, 40% and 56.6% of respondents from Uzbekistan and Kyrgyzstan find Russia the most attractive country for labor migration. Of all the Central Asian republics, remittances contribute the most significantly to the economy in Kyrgyzstan and Tajikistan, amounting to 31.3% of GDP in Kyrgyzstan and 26.7% in Tajikistan in 2020.
According to the latest EBRD report, Uzbekistan, Kyrgyzstan and Tajikistan continue to receive remittances from Russia. The volume of remittances sent to Uzbekistan in January-June 2022 reached $6.5 billion, twice as much as in the same period last year.
However, despite the increasing flow of foreign currency to Central Asian countries, the large-scale war in Ukraine and sanctions against Russia create uncertainties and complicate forecasts, which may lead to unexpected risks for Central Asian economies in the future. future. After the sanctions, the deteriorating business environment created instability for migrant workers and led to an unbalanced flow of remittances. With the war ongoing, reality resonates with people’s fear. the world Bank published an estimate that the flow of remittances is expected to decline by 33 percent in Kyrgyzstan, 21 percent in Uzbekistan, and 22 percent in Tajikistan.
Finally, according to CAB Survey Wave 11, the growing uncertainty in international business has different impacts on the countries of Central Asia. The increase in the price of oil and gas in the international energy market generated growing income for Kazakhstan and Turkmenistan and the re-export of Chinese products to Russia has been a boon for Kyrgyz small and medium-sized enterprises business. However, despite these positive effects, there are also a number of negative effects. Due to Russia’s full-scale war in Ukraine, most Russian projects are expected to remain on hold or cancelled, which will have an impact on employment rates. Furthermore, the increased production costs challenge local businesses. Since February, companies from Uzbekistan, Tajikistan and Kyrgyzstan have faced rising production costs or import problems from Russia or Ukraine. As a result, this situation affects their competitiveness, increasing uncertainty and causing closures and more job losses.
In short, despite some positive surprises, the negative impacts of the war on regional economies outweigh any incidental benefits. The consequences of the war and the economic problems mainly overlap with the economic concerns of the peoples of Central Asia. In the short term, the increase in the prices of energy raw materials may be a cushion for some Central Asian countries to reduce the negative effects of the war. However, in the medium term, the growing uncertainty in the global economy and the new waves of sanctions against Russia foresee challenges for the Central Asian economies and unexpected external shocks.