Caucasus and Central Asian countries, including Tajikistan, are closely linked to Russia through trade, financial and labor market channels, says Alberto Behar, an economist in the IMF’s Middle East and Central Asia Department.
He notes that the “tensions related to the events in Eastern Ukraine led to a renewed turmoil in the Russian market.”
This IMF economist underlined: “Experience shows that a slower growth in a large country can cause a serious collateral damage to the neighboring countries with strong ties to it.”
According to Mr. Behar, one of the features of the oil and gas-importing countries in Central Asia and the Caucasus is their dependence on remittances in regard to population’s income and foreign currency. “At least 90 per cent of remittances in Armenia, the Kyrgyz Republic and Tajikistan come from Russia, and in case of Tajikistan, the remittances are equivalent to half of the GDP,” says the economist. “Slowing growth rates in Russia means reduction in remittances: our calculations show that a 1 per cent GDP reduction in Russia may decrease remittances to the population in oil and gas-importing countries by 1.5 per cent.”
Mr. Behar notes that Russia also exports products into the Central Asian states, who are importers of hydrocarbon resources, especially oil and gas.
He notes that direct foreign investment and banking relations with Russia are relatively small, which allows to expect less significant secondary effects on these channels.
The IMF economist said: “Caucasus and Central Asian states are among the least integrated countries in the world due to barriers related to geographical features and economic policy. The current tension in the region highlights potential obstacles to further integration, but the best option is a multi-lateral approach, including reduction of trade barriers with all the countries.”
