Reuters :
The war in Ukraine will help slow the growth of officially recorded remittance flows to low- and middle-income countries to an estimated 4.2 percent this year from a strong 8.6 percent rebound in 2021, the World Bank said on Wednesday.
The World Bank said in its latest Migration and Development Brief that it expects remittances to Ukraine, the largest recipient in Europe and Central Asia, to rise by over 20 percent in 2022, but remittance flows to many Central Asian countries, will likely fall dramatically. Russia, hit with crippling sanctions by Western countries over its invasion of Ukraine, is the main source of remittances to Central Asia.
Earlier, the war has added to mounting concerns of a sharp global slowdown, surging inflation and debt, and a spike in poverty levels. The economic impact has reverberated through multiple channels, including commodity and financial markets, trade and migration links and adverse impact on confidence.
The war is also hitting hard the emerging and developing economies of Europe and Central Asia, a region that was already heading for an economic slowdown this year from the ongoing effects of the pandemic. In addition to Russia and Ukraine, Belarus, Kyrgyz Republic, Moldova and Tajikistan are projected to fall into recession this year, while growth projections have been downgraded in all economies due to spillovers from the war, weaker-than-expected growth in the euro area, and commodity, trade and financing shocks.
Russia and Ukraine account for about 40 percent of wheat imports in the region and about 75 percent or more in Central Asia and the South Caucasus. Russia is also a major export destination for many countries, while remittances from Russia are close to 30 percent of GDP in some Central Asian economies (Kyrgyz Republic, Tajikistan).
“The Ukraine war and the pandemic have once again shown that crises can cause widespread economic damage and set back years of per capita income and development gains,” said Asli Demirgüç-Kunt, World Bank Chief Economist for Europe and Central Asia. “Governments in the region should fortify their macroeconomic buffers and credibility of their policies to contain risks and deal with potential fragmentation of trade and investment channels; strengthen their social safety nets to protect the most vulnerable, including the refugees; and not lose focus on improving energy efficiency to ensure a sustainable future.”
The deep humanitarian crisis sparked by the war has been the most pronounced of the initial global shockwaves and will likely be among the most enduring legacies of the conflict.
The wave of refugees from Ukraine to neighboring countries is anticipated to dwarf previous crises. As a result, support to host countries and refugee communities will be critical, and the World Bank is preparing operational support programs to neighboring countries to meet the increased financing needs from the refugee flows.
The war-triggered spike in global oil prices also serves to underscore the need for energy security by boosting energy supply from renewable sources and stepping up the design and implementation of large-scale energy efficiency measures.
The World Bank Group is taking fast action to support the people of Ukraine. Since the start of Russia’s invasion of Ukraine on February 24, the Bank Group has mobilized an emergency financing package of $925 million in support for Ukraine. This fast-disbursing support will go to help pay wages for hospital workers, pensions for the elderly, and social programs for the vulnerable. The rapid financing is part of a $3 billion package of support that the Bank Group is preparing for Ukraine over the coming months. The invasion has already caused the largest refugee crisis in Europe since World War II. The Bank Group is looking at how to support refugees in host countries.
