Weathering Economic Storms in Central Asia : Initial Impacts of the War in Ukraine

Russia’s war against Ukraine and the international sanctions introduced against the former have had an unexpectedly mild impact on Central Asia, despite the region’s deep economic dependence on its northern neighbour. Notwithstanding high inflation, the five Central Asian states – Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan and Uzbekistan – have so far shown surprising resilience to the economic headwinds: remittances registered record-high figures in the first half of 2022, national currencies quickly rebounded to pre-war levels after an initial drop, and an influx of skilled workers boosted demand for services and hospitality. However, as the medium-term effects of the sanctions against Russia, the global cost-of-living crisis, and China’s economic slowdown start to unfold, Central Asia is faced with lingering uncertainty. This publication provides an assessment of the short-term effects of Russia’s war on Central Asian economies and the policy responses provided. It also analyses the challenges ahead and formulates policy recommendations to make Central Asian economies more resilient and diversified.