News You Really Need To See: “Contagion: As the Rouble Plunges, Central Asia Feels the Pain”

“Contagion: As the Rouble Plunges, Central Asia Feels the Pain”

The Economist, January 17-23, 2015, p.38

“Russia’s economic crunch and a falling rouble—a consequence, exacerbated by economic mismanagement, of sharply lower global oil prices—worry millions of Central Asians who depend on relatives working in the former imperial power to send money home. According to the World Bank, remittances are equivalent to a third of GDP in Kyrgyzstan and almost half in Tajikistan.  As the Russian currency sinks, the amount guest workers are able to remit, usually in dollars, falls too.  Remittances to Uzbekistan fell by 9% in the third quarter of 2014 compared with a year earlier, according to central-bank statistics in Russia.  One analyst believes remittances to Tajikistan are a fifth lower than a year earlier. … As for Central Asian labourers in Russia, some of their leaders expect about a quarter to return home.  The prospect of hundreds of thousands of unemployed young men flooding these weak states should terrify Central Asia’s graft-prone governments, which do little to create jobs and rely on emigration to ease social pressures.  In 2009, in the previous financial crisis, remittances to Kyrgyzstan fell by 28% and men returned home.  That set the scene a few months later for the violent overthrow of the country’s elected president-turned-dictator, Kurmanbek Bakiyev.”

Quickie analysis:  When Russia sneezes, Central Asians catch a cold.  How bad the cold will be this time remains to be seen.

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