The Guardian: ruble crisis major threat to 9 countries, including Armenia

PanARMENIAN.Net - Russia’s ruble crisis is posing a major threat to countries along its southern fringe, whose economies rely heavily on billions of dollars shipped home every year by their own citizens working within Russia, the Guardian says.

The 50% drop in the ruble has not only decimated the value of remittances sent home by workers from the Caucasus and central Asia, but is discouraging migrants from staying in Russia to earn a salary for themselves and their families.

According to data projections by the Guardian, based on World Bank figures, nine countries that rely heavily on cash sent home from Russia for their economic buoyancy could collectively lose more than $10bn in 2015 because of the weak Russian currency.

According to the World Bank, 21% of Armenia’s economy, 12% of Georgia’s, 31.5% of Kyrgyzstan’s, 25% of Moldova’s, 42% of Tajikistan’s, 5.5% of Ukraine’s, 4.5% of Lithuania’s, 2.5% of Azerbaijan’s and 12% of Uzbekistan’s, rely on remittances.

These are some of the highest rates in the world. Of the five countries globally whose GDP is most reliant on these payments, three are former Soviet republics. In most of these cases money from immigrants in Russia comprises a significant portion of these inflows. About 40% of remittances to Armenia, Georgia, Moldova and Ukraine are from Russia, rising to 79% for Kyrgyzstan.

Already, the sharp decline in the ruble has forced currency devaluations in Turkmenistan this month, and speculation that Kazakhstan’s tenge may need a further devaluation against the dollar after a 19% move last February.

The economies of the region are strongly tied together, with Belarus sending more than half of its exports to Russia, and the Eurasian Economic Union supposedly tying together Russia, Belarus and Kazakhstan as a single bloc. Armenia and Kyrgyzstan have also joined. In addition to the plummeting ruble, these countries will also have to deal with a potentially huge shortfall in remittances, which cannot but have an effect on GDP, the Guardian says.

In October 2014 the World Bank estimated that remittances for the year to the nine countries mentioned earlier would have totaled $33.3bn by the end of 2014. Of this figure, about $19bn would have been outflows from Russia.