Remittance flows to Azerbaijan likely to be adversely affected by Russian invasion of Ukraine - World Bank 

Remittance flows to Azerbaijan are likely to drop by 21% this year due to the Russian invasion of Ukraine, Report informs, citing the World Bank (WB) Migration and Development Brief.

Earlier, the WB forecasted a 3% growth in the remittance flows to Azerbaijan.

According to the WB, the $1.527 billion was transferred to Azerbaijan, 2.8% of the country’s GDP and 10.1% of exports of goods and services. The share of remittances from Russia was 57%.

The most significant decline in remittances flows to Eastern Europe, and Central Asia will be in Kyrgyzstan - 32% (the previous forecast was a 3% increase). Tajikistan will follow it with a 22% decline (2% increase), Uzbekistan and Azerbaijan with 21% (3% growth for both countries). Remittances to Georgia and Armenia are expected to decrease by 5% and 19%, respectively. Earlier, these countries were projected to see 2% and 11% growths.

Only Ukraine will see growth in remittance flows. The World Bank believes the money transfers to this country will increase by 22%.

“Remittances constitute a vital source of funding and a driver for economic growth in the economies of Eastern Europe and Central Asia. For example, in Tajikistan and the Kyrgyz Republic, remittances in 2021 were respectively 34 percent and 33 percent of GDP and were comparable to—or even larger than—the countries’ exports of goods and services.

“Russia was the largest source of remittances to many Central Asian countries, but transfer volumes have been on a downward trend since 2014 peaks. Despite this, outward remittances from Russia remain large and account for roughly two-thirds of total remittance receipts for Central Asian countries, the Kyrgyz Republic, Tajikistan, and Uzbekistan, as well as for Armenia and Azerbaijan in 2021.

“Remittance flows to many Central Asian countries are likely to be extremely adversely affected by the Russian invasion of Ukraine. Although direct financial links with Russia are not particularly strong, some countries’ exposure through remittances is substantial.

“Remittances look set to decline by an average of 25 percentage points in 2022 based on an initial assessment of the first-round effects of a decline in economic activity in Russia and currency depreciations in most source countries (mainly the Russian ruble) against the US dollar, and possibly, the impact of Russian capital controls,” the Bank said.