YEREVAN, March 14. /ARКА/. A hypothetical ceasefire between Russia and Ukraine would not have a significant immediate impact on the banking sector of Central Asian and Caucasus countries, including Armenia, Azerbaijan, Georgia, Kazakhstan and Uzbekistan, according to a commentary by S&P Global Ratings analysts, as reported by FrankMedia.
“We do not foresee significant risks to the stability of the banking sector in 2025 if the ceasefire materializes,” the report notes.
Analysts believe that in the event of a ceasefire, there will be no sharp outflow of deposits from Central Asian and Caucasus banks. According to their data, the inflow of non-resident deposits, primarily from Russia, has already declined after peaking in 2022–2023.
And even if some of the funds are withdrawn back to the Russian Federation or transferred to other countries, the high uncertainty surrounding the macroeconomic and political situation in Russia, including restrictions on money transfers and currency conversion, will restrain large-scale outflows in the near future, they believe.
At the same time, the volume of money transfers, according to the agency’s forecast, will decrease. In 2022, their sharp growth improved the current account balance of the balance of payments by an average of 6.5 percentage points in Uzbekistan, Georgia, Armenia, Azerbaijan, Kazakhstan and Tajikistan.
In 2024, the volume of money transfers again grew significantly, especially in Uzbekistan and Armenia, but its gradual normalization is expected. At the same time, for households in Uzbekistan, Georgia and Armenia, migrant money transfers (mainly from Russia) will remain an important source of income, the commentary says.
The growth in bank commission income, which increased significantly in 2022-2023, according to S&P, will stabilize at a lower level. A significant effect on lending is also not expected, since migrants and companies that moved to the region were not large borrowers. In addition, the real estate market, which previously grew against the backdrop of the influx of migrants, will remain relatively stable, since most newcomers preferred to rent housing rather than buy it, economists emphasize.
Macroeconomic effects in the countries of the region will be restrained, at least in the short term, according to S&P analysts.
“We believe that an immediate and significant outflow of migrants, investment and capital from Central Asia and the Caucasus after a potential ceasefire is unlikely. This should limit economic volatility,” they said in their commentary.
The agency also does not expect a large-scale outflow of the population, since the peak of migration has already passed, and many migrants have either returned to Russia or left for other countries. The report cites the following data: in 2022, about a million people left Russia, including about 150 thousand who went to Kazakhstan, the same number to Serbia, about 110 thousand to Armenia and about 62 thousand to Georgia. At the same time, the positive economic effects of migrants, which contributed to the development of such sectors as IT, logistics, financial services and tourism, will remain, although their scale will decrease somewhat, the authors of the report note. -0-
