May 2, 2014 / 11:36 AM / 4 years ago

Ukraine crisis fallout threatens Caucasus, Central Asian economies -ADB

* Asian Development Bank wary of escalation of crisis, sanctions

* Weak Russian growth would impact imports, worker remittances

By Dmitry Solovyov

ASTANA, May 2 (Reuters) - A worsening of the Ukraine crisis could harm the economic growth prospects of a large group of post-Soviet nations, given their dependence on exports to and worker remittances from Russia, the Asian Development Bank (ADB) said on Friday.

The bank expects the vast region comprising the Caucasus nations of Armenia, Azerbaijan and Georgia, plus Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan in Central Asia, to post economic growth of 6.5 percent in 2014.

That is unchanged from last year and the same as its forecast for 2015, Juzhong Zhuang, ADB deputy chief economist, told a news conference on the sidelines of the bank’s annual meeting held in the Kazakh capital.

But fallout from the crisis in Ukraine needed to be managed first, he said, while declining to estimate to what degree an escalation might impede growth.

An early economic victim of the crisis was a long-planned Eurobond issue of up to $1 billion that Kazakhstan said on Friday it was postponing until later this year.

The former Soviet region’s biggest oil producer after Russia, Kazakhstan has backed close ally Moscow’s actions in Ukraine. It is seeking alternative routes for its oil exports, which may fall if the West decides to toughen sanctions against Russia, a major transit route of Kazakh crude to world markets.

The United States and the European Union imposed sanctions after Russia annexed Ukraine’s Crimea peninsula, which they could step up.

“Economic sanctions can affect Russia’s growth and hence reduce (Russia‘s) demand for exports from Central Asian countries,” Jhuang said.

Some 24 percent of Uzbek exports go to Russia, ADB data show. It also accounts for 20 percent of exports from Armenia, 15 percent from Kyrgyzstan and 7 percent from Kazakhstan.

The International Monetary Fund slashed its 2014 growth forecast for Russia this week to 0.2 percent from 1.3 percent, warning Ukraine-related sanctions were scaring off investors and pushing the economy towards recession.

As well as cutting its imports, lower growth in Russia would also lead to a reduction in the cash remittances that migrant workers from former Soviet states send home, Jhuang said.

Such remittances, which support families and spur investment and consumption, account for 40 percent of GDP in Tajikistan, 29 percent in Kyrgyzstan and 15 percent in Armenia, Jhuang said.

The ADB said higher oil prices - another possible consequence of a deeper crisis in Ukraine - would benefit oil and gas producers and exporters Kazakhstan, Turkmenistan, Azerbaijan and Uzbekistan but hit the other four nations, which are energy importers.

Policy issues facing the countries include improving infrastructure and connectivity, bearing in mind many are land-locked, and diversifying their economies, Zhuang said. (Writing by Dmitry Solovyov; Editing by John Stonestreet)

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