Russians fleeing the war sparked an economic boom in Central Asia
Having unleashed a war in Ukraine, Vladimir Putin deprived the Russian economy of prospects, but “transferred” its potential to neighboring countries. Last year, Georgia and Armenia “shot” where the Russians most often fled after the start of the war. In 2023-2024, according to the European Bank for Reconstruction and Development (EBRD), human and financial capital from Russia will make a significant contribution to the growth of Central Asian economies.
The combined GDP of the region will grow by at least 5.2% this year and around 5.4% next year, thanks to the relocation of companies and people from Russia, better governance, increased exports of goods and the opening of the Chinese economy, the EBRD report says. In 2022, the increase was 4.5%.
Meanwhile, Russia’s GDP shrank by 2.1 percent last year, according to the bank, and will shrink by another 1.5 percent this year. And only in 2024, the EBRD expects an increase – but only by 1 percent.
Relocation of highly qualified Russians to Central Asian countries, transfer of personal funds, corporate capital and companies there, and opening of new EBRD notes. In addition, the economies of the region are benefiting from the recovery in trade relations with Russia, which is due to one cause and two effects. The goods vacuum created in the Russian economy due to the sanctions and the departure of international companies is being filled by regional producers (who, among other things, are investing in the creation of new capacities for this purpose) and organizers of re-export routes redirecting Western goods to Russia.
The EBRD even coined the term “Eurasian carousel” for such re-export channels. Deliveries of goods from the European Union and the United States to Kazakhstan, Kyrgyzstan and Uzbekistan increased by $6.9 billion in 2022. to $17.4 billion, while exports from the three countries to Russia rose $3.3 billion, according to The Wall Street Journal, based on UN trade data.
About 15,500 companies in Kazakhstan now have Russian capital, twice as many as a year ago, EBRD chief economist Beata Javorchik told Bloomberg. And there may be even more.
Thus, Polymetal, a gold, silver and copper mining company, announced in January that it may re-incorporate the company from an offshore Jersey island to Kazakhstan: “The company assessed the possibility of changing the country of registration of Polymetal International’s parent company to a “friendly” jurisdiction <…> and considers the Astana International Financial Center to be the preferred jurisdiction.”
Last week, Polymetal announced the start of a shareholder vote to transfer the registration to Kazakhstan; the results will be announced on May 30. If the decision is positive, the process of separating assets into Russian and Kazakh will begin in the fourth quarter of 2023 and end in the second half of 2024.
Russians move their savings abroad, Russian companies settle there, and the countries of Central Asia benefit from it, says Jaworczik:
The EBRD believes that the economic situation in Ukraine, where almost a third (29.1%) of GDP was “killed” by Russia with the invasion, is starting to stabilise. It expects GDP to grow by 1% this year and 3% next year.