15:55 - 1.12.2022

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December 1, Fineko/abc.az. The war in Ukraine may increase the level of poverty in the Caucasus and Central Asia by 1 percentage point due to its impact on inflation and remittances.

ABC.AZ reports with reference to IMF’s assessment that this means that about 1 million more people may be below the poverty line in the coming years.

"The level of poverty in the countries of Trans-Caucasus and Central Asia may increase by 1 percentage point due to the consequences of the conflict in Ukraine," the IMF said.

The IMF noted that an increase in inflation rates in the region was observed even before the conflict began, but its impact on world food and energy prices "worsened forecasts". According to the Fund, Kyrgyzstan and Tajikistan will suffer the most.

"A sharp reduction in remittances may lead to an even more significant increase in the poverty level - up to 1.4 pp in Tajikistan," the IMF believes.

At that, experts admitted they expected even more significant negative consequences for Trans-Caucasus and Central Asia.

"But, surprisingly, economic activity in most countries of the region is still at a good level, partly due to unexpected positive side factors, including income growth and financial inflows to the region," the IMF said.

“Although food prices are below their pre-war levels now, they are still significantly higher than the 2021 average. High food prices are especially concerning for low-income families who have low savings and spend a higher share of their income on food - as much as 60 to 70 percent in Azerbaijan, the Kyrgyz Republic, and Tajikistan.

Remittances account for 10 to 30 percent of the gross domestic product in Armenia, Georgia, the Kyrgyz Republic, Tajikistan, and Uzbekistan. Russia is the most important source of remittances for most of these countries, especially for the Kyrgyz Republic and Tajikistan. Historically, remittances from Russia are strongly correlated with Russia’s GDP - the higher the GDP, the higher the level of remittances,” reads the article.