EastFruit experts recently published assessments of the impact of russian aggression in Ukraine on food security and macroeconomic stability in Uzbekistan and Tajikistan. Now we want to give a more accurate estimate of how much citizens of these countries will pay for the decision of russian dictator putin to invade peaceful Ukraine.

We assessed the devaluation of local currencies against world currencies, the decline in income from labor migrants and abnormal inflation, i.e. inflation exceeding pre-war expectations. We also took into account the aggravation of the food security in the second half of the year and the further aggravation of logistical problems.

We want to note right away that according to international experts, the strengthening of the ruble in late March – early April, which led to a sharp strengthening of the Uzbek sum and Tajik somoni, is a short-term phenomenon. It cost russia $40 billion in just one month of direct intervention in the foreign exchange market, and russia does not have large reserves, since they are arrested or under sanctions. In addition, there are now 3 or even 4 exchange rates in russia at once, and the real exchange rate differs from the official one by almost twice.

Since russia received its main income from the export of oil and gas, which supported the ruble exchange rate, then the bad news for russia will also be a sharp refusal of the main buyer – the EU countries, from these and other russian goods. Imports of gas and oil have already fallen significantly, and within 2 years Europe will almost completely abandon them.

Accordingly, the devaluation of the russian ruble against the dollar and the euro is inevitable in the coming months. Moreover, this time the fall may become completely uncontrollable and affect the exchange rates of countries very closely connected economically with Russia. In particular, this applies to Uzbekistan and Tajikistan, but to a much greater extent to Kazakhstan and Kyrgyzstan.

So, how much will each resident of Uzbekistan and Tajikistan pay for the war unleashed by putin and his electorate in Ukraine?

We took the food baskets of Tajikistan and Uzbekistan as the basis for the calculation. Taking into account the forecasts of rising prices for basic goods and services in these countries, it turns out that each resident of Uzbekistan will pay about $1 100 for the war in Ukraine in 2022, and each resident of Tajikistan will pay about $700. This applies to every resident, including children.

In other words, if the average household size in Uzbekistan is 5 people, such a family will pay about $5 500 per year for russia’s war against Ukraine! Similarly, for Tajikistan, where the average family size is 5.8 people, the loss of a household from the war unleashed by russia will be $4 100! This is real money that these families could spend on educating their children, improving their living conditions or medicine. More precisely, this means that, for example, one does not have enough money for an operation that would save the life of a child or an adult.

These estimates do not take into account the loss of income of countries, in particular from the reduction in money transfers from labor migrants, which will also be measured in billions of US dollars. And this means that construction in Uzbekistan and Tajikistan may stop, and construction and development companies that used to sell new housing to families of labor migrants who sent home money earned in russia may go bankrupt. This is a huge loss for the economy, for people and their families.

This, accordingly, will result into a crisis in other areas related to the construction industry and will slow down the development of retail and wholesale trade, which is the engine of the economy of these countries. Returning labor migrants, who were previously sources of income, will become sources of expenses – Uzbekistan and Tajikistan will need to increase food imports, while the global food crisis will only be worsening.

The livestock sector will suffer more than others in the agriculture of Uzbekistan and Tajikistan. Ukraine, the largest feed exporter in the region, will not be able to export almost anything in 2022. Minor volumes that will be exported will go to the EU countries. Thus, protein-deficient Uzbekistan and Tajikistan will experience an acute shortage of livestock feed and a sharp increase in their cost, while the real incomes of their population will decline. This means that it will be impossible to raise prices for milk and meat, since consumers will not afford them.

Accordingly, as early as June-July, a massive reduction in the number of farm animals may begin in Uzbekistan and Tajikistan, primarily in professional enterprises. This will temporarily stabilize meat prices as supply increases, but in the long run, meat prices could soar to alarmingly high levels.

And this is the price that innocent residents of Central Asian countries will pay, and are already starting to pay, for putin’s criminal aggression in Ukraine.

Сообщение How much will residents of Uzbekistan and Tajikistan pay for russian aggression in Ukraine? появились сначала на EastFruit.

Russia’s full-scale perfidious invasion of Ukraine in February 2022 had a shocking effect on the market of Moldova, which is a neighbor of Ukraine and has close economic ties both with it and with the aggressor countries: russia and belarus. In addition, Ukraine was actually the only transit country for the export of products from Moldova to the russian and belarusian markets, but transit through Ukraine is now impossible. Therefore, Moldova has to look for other, more expensive and complex logistics solutions, which led to a virtual halt in its exports, EastFruit analysts state.

In addition to the fall in export earnings, Moldova also faced the fact that many goods previously imported from Ukraine, including food, were no longer supplied. This has led to panic among consumers and will be a big test in the long run. About 20-22% of all food imports to Moldova came from Ukraine, which was its main food supplier. By the way, russia was also an important supplier with a share of 9-10%. In other words, almost a third of food imports suddenly became unavailable, which cannot but lead to a severe shock to the market.

The main import commodities that have become drastically unavailable or supplies of which have plummeted are dairy products, several types of vegetables, animal feed, confectionery, milling products, and salt.

In addition to its own population, Moldova now also has to provide for temporary migrants from Ukraine – according to various estimates, the country received from 320 000 to 350 000 people! And this is almost 14% of the population of Moldova itself! Accordingly, with a reduction in the supply of food products in Moldova, the need for them has increased dramatically.

Another important factor that affects the macroeconomic stability in the country is the decrease in remittances from labor migrants.

Not to mention the issue of record high energy prices, which also have a negative impact on agriculture and the food industry in Moldova.

Let’s look at the intermediate consequences of the criminal actions of russia and belarus for the economy and food security of Moldova.

How has the exchange rate of the national currency of Moldova, the leu, against the dollar and the euro changed since the beginning of the war?

Fluctuations were observed in the foreign exchange market of Moldova. According to the data of the NBM (National Bank of Moldova), the US dollar registered a continuous growth trend from 17.95 MDL on 24/02 to 18.44 MDL on 20/03. Thus, the dollar rose by 3% against the leu. Unlike the US dollar, the euro fluctuated more dynamically during this period, but the current exchange rate is almost at the same level compared to the beginning of the war.

How have consumer sentiments changed in Moldova, were there panic buying and how has the assortment changed?

According to official data, inflation in Moldova reached 18.5% in February. Thus, Moldova became the country with the highest inflation rate in Europe. Even in Ukraine, inflation in February amounted to only 10.7%. Purchasing power in this context also declined accordingly.

Given the close trade ties with the countries directly involved in the war, irrational consumer behavior was observed in Moldova – people bought some food products in excessively large quantities.

Currently, there is a shortage of edible salt in Chisinau shops. About 85% of salt is imported from Ukraine, so it is not surprising that demand for salt has grown most significantly since the beginning of the war. Salt is also imported from Bulgaria, Romania, Poland and Italy, but in limited volume. The price has doubled and there is almost no salt in stores.

There is also a real shortage of buckwheat, which is likely to be more problematic in the future. About 85% of buckwheat on the shelves of Moldovan stores was brought from Ukraine and russia. There is practically no buckwheat in stores at the moment, and if it appears, it is quickly sold at a price 80% higher than before the start of the war.

There was also a slight panic in the case of sunflower oil, but the largest producer of sunflower oil in Moldova, TRANS-OIL, said that there is and will be oil on the domestic market and managed to reassure consumers. However, the price of sunflower oil also increased by about 20%.

The prices of many other foodstuffs have also risen notably.

We also note that due to the fact that bananas can no longer be imported through the port of Odesa (Ukraine), there is a shortage of bananas on the market, and they are about 35% more expensive than before the start of russian aggression against Ukraine. And this despite the fact that global market prices for bananas have fallen sharply.

Do farmers plan to change the structure of sown areas and how are things going with the sown area?

At the moment, many farmers in Moldova are concerned about the extremely high prices for fuel, as well as inputs and fertilizers, which are mainly imported from Ukraine. Therefore, in addition to high prices, there is an urgent need to find new suppliers and have time to deliver these goods before the start of a new production cycle. Obviously, these factors can affect the yield and even the area of ​​many agricultural crops.

In the current situation, according to the forecast of representatives of the industry association, the area planted with potatoes in specialized farms is still most likely to decrease. The projected reduction in the area of potato plantations will worsen the country’s food security, since this is one of the key products, which was previously partially imported from Ukraine.

Many farmers are discussing the need to expand sunflower and corn crops this year, provided they can find the necessary resources for this.

Meanwhile, many producers have abandoned growing vegetables in greenhouses, because heating greenhouses is too expensive due to a sharp rise in energy prices. Therefore, vegetable prices can be relatively high out of season. On the other hand, the supply of Turkish vegetables may increase, as it is obvious that deliveries to Ukraine have practically ceased, and deliveries to russia are significantly reduced.

Apple producers found themselves in a particularly difficult situation, having suddenly lost almost all traditional and any large sales markets. Few of them have yet voiced plans to uproot apple orchards, but this process is almost certain to accelerate (the total area of ​​apple plantations in the country has decreased by about 3 000 hectares to 49 000 hectares in 5 years).

On the other hand, the heads of large nursery farms claim that by mid-March there was not a single case of termination of contracts concluded earlier for the purchase of planting material for perennial fruit crops on the initiative of agricultural producers. Some nurseries even increased the shipment of seedlings in March, because due to the dry autumn in 2021, some of their customers postponed the delivery date to spring 2022. Nevertheless, the prospects for investments in the fruit growing sector of Moldova this year are poor, since Moldova has failed to find an alternative to the russian market for apples.

How much has the volume of remittances from labor migrants decreased and how will this affect the economy?

It is estimated that about 250 000 Moldovan citizens work in russia. However, half of them is expected to return home as they claim their dollar-denominated salaries have fallen and some have even lost their jobs. Now they have to save money or think about returning home or moving to another country.

It has also become difficult to send money to relatives in Moldova. The volume of remittances from the russian federation decreased by about 15% to 30%. At the same time, it was russia that was the leader in money transfers to Moldova.

After Western Union announced the suspension of operations in russia and belarus, transfers through the Zolotaya Korona and Unistream money transfer systems to citizens of Moldova became possible. However, money transfers in foreign currency (USD and EUR) from russia to Moldova cannot be made through russian money transfer systems such as Contact, Unistream, Zolotaya Korona, money can only be transferred in rubles.

Сообщение Moldova: impact of the war on food security, macroeconomic stability and agribusiness появились сначала на EastFruit.

The treacherous attack of a huge russian army on Ukraine on February 24, 2022 threatened the food security of Uzbekistan and many other countries globally, impacting the already fragile global balance of food supplies. The government of Uzbekistan manages to cope with emerging threats so far, but the main challenges are yet to come.

In this article, we will outline the situation with food security, macroeconomic and financial stability, as well as consumer sentiment in Uzbekistan and try to assess the prospects and options for future developments.

Uzbekistan is a net importer of food items. The negative trade balance is about $500 million per year.

At the same time, 36% of imports are direct deliveries of food from countries that are directly involved in the war. About 30% of Uzbekistan’s food is imported from the russian federation, 4% from belarus and about 2% from Ukraine. The data on the supply of food from russia to Uzbekistan may even be underestimated, as some of the goods enter the country through intermediaries from Kazakhstan.

In exports, Uzbekistan’s dependence on food supplies to these three countries is even higher – according to our estimates, it is about 42%! About 40% of food products are exported to the russian market, including volumes passing through such intermediaries as Kyrgyzstan and Kazakhstan.

Accordingly, the impact on the food market of Uzbekistan of the war in Ukraine may be huge in the long term.

The most sensitive positions of Uzbekistan’s food trade

More than 60% of all food imports of Uzbekistan are high-calorie basic products, such as grain and grain products, vegetable oil and raw materials for its production, as well as sugar.

Quite sensitive to changes in the conjuncture of imports is the category of feed for livestock and, to a lesser extent, the import of meat itself. Uzbekistan is a net importer of all these goods, meaning that changes in import regimes, availability of imported goods and their prices can have a large impact on the domestic food market and food security.

The situation in Uzbekistan in terms of food security is relatively favorable only in terms of vegetables and fruits, with the possible exception of potatoes. However, there is also an issue of great dependence of the fruit and vegetable business of Uzbekistan on the supply of vegetables and fruits to the markets of russia and other countries that have close trade ties with it. Due to the sharp drop in effective demand in russia, the sharp devaluation of the local currency and the outflow of the population from the country, traders and producers in Uzbekistan urgently need to look for alternative markets. This is not an easy task, because Uzbekistan’s logistics are expensive and complicated. These products are classified as perishable, and their quality leaves much to be desired from the point of view of countries that are more demanding than russia on the quality.

However, let’s get back to the critical import categories.

In terms of grain and grain processing products, Uzbekistan’s dependence on russia is not too high – the bulk of the products are imported from neighboring Kazakhstan. Small volumes are imported from Ukraine.

There are no problems with vegetable oils either – there is no ban on exports from the russian federation, dependence on supplies from Ukraine is also minor – within 1-2%. Of course, oils and grain may rise in price, but this is a global problem.

As for sugar, the problem is quite tangible. Imports from russia accounted for more than 60% of imports of sugar and confectionery, and now there is a direct ban on exports. The share of sugar imports from Ukraine was tangible – about 4%. Accordingly, the solution to the problem could be an increase in domestic processing of raw sugar, which can be imported from Brazil and other major supplying countries, but the main question here is whether the capacities of Uzbek enterprises allow this.

The general situation in terms of imports does not look threatening, although the increase in food prices is undoubtedly causing serious concern among the population. According to analysts, the price increase may be much larger by the end of the year, as the world is still tapping into 2021 harvest stocks.

The exchange rate of the dollar and other currencies in relation to the Uzbek sum

In Uzbekistan, the exchange rate of the US dollar and other major currencies, except for the russian ruble, remained relatively stable until March 9. For example, from February 24 to March 9, the US dollar exchange rate set by the Central Bank of the Republic of Uzbekistan increased from 10 840 to 10 897 UZS per $1, that is, only 0.5%. Since the rate is set by the Central Bank, the regulator has apparently taken a wait-and-see position – the war could be short-term and then everything will return to normal. But the war dragged on, and the Central Bank began to gradually devalue the sum – from 9 to 15 March, the US dollar exchange rate increased from 10 897 to 11 033 UZS per $1, i.e. by 1.2% in a week.

However, this is a meager devaluation of the sum, given that in the second half of March and early April, the season for shipping early vegetables to foreign markets starts. The russian, Kazakh and Kyrgyz markets are the main ones, and their currencies have fallen significantly against the US dollar. In addition, shipments of dried fruits and vegetables, as well as frozen ones, continue and will continue. By that time there was an understanding that the war was entering a protracted phase, and the negotiations had not yet yielded visible results. From 15 to 18 March, the US dollar exchange rate rose sharply – from 11 033 to 11 572 UZS per $1, i.e. by 4.9% in 3 days.

Thus, from February 24 to March 18, 2022, the US dollar exchange rate in Uzbekistan increased from 10 840 to 11 572 UZS per $1, i.e. by 6.8%. But this is not enough to make Uzbek goods competitive in price in the main sales markets, where the devaluation was more significant. On the other hand, effective demand in the key sales markets, especially in russia, also fell sharply, so even with a sharp currency devaluation, it would not be easy to maintain high volumes of product exports. In addition, a sharper devaluation of the national currency of Uzbekistan could have a negative impact on inflation indicators.

Consumer sentiment in Uzbekistan and panic buying

During the audit of the stores of the supermarket chains in the capital of Uzbekistan, as well as in communication with the residents of the country, EastFruit experts did not notice any critical changes in consumer sentiment.

A short-term excitement arose due to a temporary ban on the supply of russian wheat and sugar, but the official authorities reacted almost immediately and reassured the population with statements that there would be no shortage of wheat and sugar in Uzbekistan! For example, wheat will be provided with local production plus imports from alternative suppliers, sugar will be bought from an alternative supplier – Brazil. Here is an example of a statement by the Ministry of Agriculture.

Nevertheless, there was an impact of such a ban on consumer sentiment. Some chains have introduced restrictions on the sale of sugar in one hand: in the “Basket” – 2 kg per person, “Macro” – 4 kg, but “Havas” sells 10 kg. In the Carrefour chain, people also freely buy 10 kg of sugar. The Kazakh chain “Magnum” even touted buyers during the celebration of Navruz by the fact that they had a lot of sugar at a bargain price.

Many older people made a stock of pasta, cereals and other essential products just in case, but this did not have a critical impact on the provision of stores with goods, but rather contributed to a short-term increase in sales.

Otherwise, there are no changes in consumer sentiment in the capital of Uzbekistan, including excitement or panic.

The range of food in supermarkets in Uzbekistan and the structure of crops

Changes in the range of vegetables and fruits, other food products, as well as other categories – including household chemicals, medicines and other essential goods, are currently not observed in Uzbekistan.

Similarly, no intentions to change the structure of sown areas in Uzbekistan have been noted so far. Farmers are more concerned about the impact of weather in March 2022 on their crops than any possible food shortages.

Remittances from migrants  

Money transfers from labor migrants can be problematic. The impact of the war in Ukraine on the volume of cross-border transfers to Uzbekistan from labor migrants can be much more negative now than during the COVID-19 pandemic, when a large part of labor migrants “stayed at home”.

Since about 75-80% of labor migrants’ remittances come from russia (65-70%) and Kazakhstan (7-10%), the impact will have two aspects. First, the depreciation of the russian ruble automatically reduced the income of “russian” labor migrants by 25–30% in US dollars, and that of “Kazakh” migrants by about 15–18% in US dollars. Even without taking into account other factors, the devaluation of the russian ruble and the Kazakh tenge is already leading to a significant decrease in the volume of remittances from these countries.

The second point is a severe deterioration in the economic situation in russia and, as a result, in Kazakhstan, too, since the economy of the latter is closely interconnected with the russian economy. The consequences for Uzbek labor migrants are an increase in unemployment in russia, a sharp reduction in demand for foreign labor, and, most likely, a decrease in wages of migrants. All this leads to a reduction in the number of labor migrants, to a greater extent in russia and probably to a lesser extent in Kazakhstan, as well as a decrease in their income.

In early March, the Agency for External Labor Migration conducted an anonymous survey among labor migrants on its official Telegram channel.

The respondents were asked the question: “Do you plan to return to Uzbekistan from russia in the nearest future?“. Four response options were then offered, and the results are as follows:

As of March 18, 2022, 13 600 respondents participated in the survey.

As can be seen from the table, so far only 35% of respondents are firmly convinced to continue their work; 24% may return if the russian ruble continues to depreciate; and 41% of respondents want to return to Uzbekistan due to a sharp decrease in income due to the devaluation of the ruble or because of the loss of a job. According to various estimates, there are 1.5-2.0 million labor migrants from Uzbekistan in russia.

If we sum up these two aspects (devaluation of the russian ruble and Kazakhstani tenge + deterioration of the economic situation, first of all in the russian and then Kazakhstani economy), we can imagine how the total volume of remittances to Uzbekistan can decrease.

For your information, according to the Central Bank of the Republic of Uzbekistan, the volume of receipts through the international money transfer systems for 12 months of 2021 amounted to $8.1 billion, which is 34% more than in 2020 and 2019. According to rough estimates, 65-70% of this amount comes from russia – about $5.5 billion and 7-10% from Kazakhstan – about $650 million.

This is a serious inflow for the economy of Uzbekistan and how much it will decrease in 2022 is a big question. The first results will be visible in the 1st quarter of 2022, and the fullest effect will be seen in the 2nd quarter of 2022. Even if revenues are reduced by a third at the end of the year, which is quite likely, Uzbekistan will not immediately get $2.7 billion.

This is equivalent to the total absence of exports of fruits and vegetables from Uzbekistan for three years! Accordingly, this will seriously affect all other segments of the country’s economy.

In terms of estimates, the World Bank forecasts a 21% decline in remittances to Uzbekistan, but this forecast was released before a survey of labor migrants on plans to return to Uzbekistan from russia. Therefore, taking into account the results of this survey – that is, the current sentiment of Uzbek labor migrants, this assessment can be adjusted towards a more negative impact.

By the way, for the convenience of migrants and their relatives, all banks in Uzbekistan buy and sell the russian ruble now, since russia itself has an acute shortage of foreign currency in cash. This alleviates some of the problems, but does not solve them.

State regulation

The first measures to regulate prices are taken by the government in relation to sugar. In some regions, its prices even rose to 20 000 UZS/kg. Prices for buckwheat, which was also mainly imported from the russian federation, increased significantly.

Also, the government of Uzbekistan is now trying to intensify trade with Asian countries, in particular with Pakistan, Iran, India and China, in order to reduce trade dependence on supplies from russia. In addition to potatoes, they have already begun to buy meat from Pakistan.

We hope that this will also expand the possibilities for exporting fruits and vegetables from Uzbekistan in 2022.

Conclusions   

The situation in the food market in Uzbekistan remains stable at the moment, but we should expect an increase in inflation in the country and a deterioration in the overall macroeconomic situation due to a decrease in remittances from labor migrants. Also, food prices are likely to keep rising in the coming months affecting the access of the country’s poorest residents to the minimum set of food calories. The situation may worsen if many labor migrants from russia and Kazakhstan return in the event of a job loss, as they will also want to buy a food basket that has risen in price. This will lead to the need to increase imports while reducing incomes.

There is also concern about the prospect of exporting fruits and vegetables to the markets of russia, Kazakhstan and Kyrgyzstan, where there is a decrease in the level of incomes of the population and the devaluation of local currencies. This may lead to a decrease in the income of the country’s farmers and the curtailment of investment projects in this area.

The crises with high food and energy prices, complex and expensive logistics, and the growing number of trade barriers in the world are likely to persist for several years and will have a global nature.

Сообщение Uzbekistan: food security, exchange rate, macroeconomic stability появились сначала на EastFruit.

In this article, we will outline the situation regarding the food security, macroeconomic and financial stability, as well as consumer sentiment in Tajikistan and try to assess the prospects and options for the developments in the future, given russia’s perfidious invasion of Ukraine, which undermined the foundations of the well-being of the whole world.

Tajikistan is a net importer of food. The negative trade balance is about $800 million per year. In other words, relatively small Tajikistan has a sharper negative food trade balance than neighboring Uzbekistan.

At the same time, 31% of imports are direct deliveries of food from countries that are directly involved in the war. About 30% of Uzbekistan’s food is imported from russia and about 1% from Ukraine. Imports from belarus are relatively small. The data on the supply of food from russia to Tajikistan may be somewhat underestimated, as partially food enters the country through intermediaries from Kazakhstan, and Kazakhstan is the largest supplier of food to Tajikistan with a share of 40%.

Tajikistan’s food exports are relatively small, less than $100 million a year. However, the real numbers could be significantly higher. Nevertheless, the country’s dependence on exports is indeed not too high in most positions. Only in the category of fruits and dried fruits, as well as some early vegetables, the opportunity to export helps maintain prices in the domestic market. Of course, the sharp decline in the purchasing power of russian residents is bad news for Tajik exporters and encourages them to look for alternative markets right now.

The most sensitive positions of food trade in Tajikistan

Tajikistan’s critical import categories are wheat and wheat flour, vegetable oils and fats, and sugar. These three product categories account for more than 55% of all imports. About 10% more are fodder grains and oilseed meals used in animal husbandry, where the country is also dependent on imports.

Although the dependence on russia in wheat imports is low, almost all food wheat in Tajikistan comes from Kazakhstan. At the same time, Kazakhstan recently announced that wheat exports could be banned or severely restricted, which could create serious problems for Tajikistan.

There should be no big problems with vegetable oil, although the increase in its cost will affect its availability for low-income segments of the population.

Slightly worse is the situation with sugar, which Tajikistan partially imported from russia and belarus. However, the main supplier of sugar to the country is India, which means that Tajikistan can try to increase the volume of imports from it. In any case, one should expect price growth here too, which is a significant problem for Tajikistan.

Feed will also become very expensive for the country’s livestock producers. Ukraine, which has been the largest feed exporter in the region, will obviously not enter the market many more months, even if the war ends. Although feed can be bought, its prices could rise the most, hurting Tajikistan’s already not-so-efficient animal husbandry and exacerbating the country’s access to this important source of protein.

The exchange rate of the national currency of Tajikistan somoni

Before the start of russia’s war against Ukraine, the official exchange rate of the Tajik somoni against the dollar was 11.3, and now it is closer to 13.0. Due to the panic that arose, the exchange rate on the black market even rose to 14.8 TJS, but then it was fixed at a level close to 13.0 TJS.

Accordingly, almost all imported goods in the country have risen in price along with the exchange rate by at least 20%. At the same time, according to market participants, many traders are already counting the rate at 15 TJS, as they are not sure that they will not go bankrupt later. Thus, the increase in price is 30%. This applies, of course, only to imported goods.

In relation to the russian ruble, the local currency has risen in price by more than 40%, and the rubles that migrants send have depreciated in relation to the local currency.

Consumer sentiment in Tajikistan and panic buying

In rush days after the start of the russian war against Ukraine, when it became clear that russia’s plan had failed, people massively bought oil, flour and sugar. They, in turn, have risen in price by 30%. All this was aggravated by russia’s bans on the export of these goods.

Traders reacted quickly and immediately increased the supply of sugar from India. Indian sugar is 20% cheaper than russian, but many people prefer products from the russian federation, considering them to be of higher quality.

Also, consumers began to buy pasta. It is produced in Tajikistan from Kazakh flour. Therefore, even local pasta has risen in price by 30% or more. Imported pasta from russia has risen in price by 50%. The price of local oil also went up by 20-30% (sunflower and cottonseed). The import of cottonseed oil from Uzbekistan has increased.

Many people have stopped investing in real estate, and sales in the used car market have risen, which may have implications for the construction business in Tajikistan in the long run.

Meanwhile, the range of food products has not changed. There are still no empty shelves in stores, and all products are constantly present. Only the prices have changed.

Will the crop structure in Tajikistan change this year?

The crop structure is unlikely to change drastically. Only onions in large volumes were exported to the russian federation, but they were sown in the fall. Farmers just keep doing what they always do and grow the crops they are used to.

Nonetheless, farmers complain about very high prices for fertilizers, which have risen sharply in recent years. However, prices had risen even before the start of the russian invasion of Ukraine. The news was that russia stopped exporting fertilizers to Tajikistan.

Therefore, since everything is expensive, Tajik farmers will use fewer fertilizers this year. Leading farmers have already bought fertilizers for the upcoming season in winter or transport them from Uzbekistan, since the roads have opened and COVID-19 restrictions with Uzbekistan have been lifted.

However, there will be a decrease in the volume of fertilizer use for the new crop. And this means that the average crop yield is likely to decrease.

The impact of remittances from labor migrants on the Tajik economy

Tajikistan is one of the leading countries in the world in terms of the share of remittances from migrants in the structure of GDP. For example, at the beginning of the global crisis, in 2008, 49% of Tajikistan’s GDP came from migrant remittances, according to one of the studies. However, we do not have exact official data on the current share of remittances from migrants. Clearly, its impact on the economy and macroeconomic stability of Tajikistan has been and remains huge.

It is obvious that the collapse of the exchange rate of the russian ruble against the US dollar will reduce the volume of cash receipts proportionally. At the same time, Tajik migrants themselves see no reason to return home. They say that prices for the basic products they buy in russia have not risen much, but the cost of renting housing has increased.

There are still many people in Tajikistan willing to go to russia. Trips have become more difficult, as there were no flights to russia for two weeks. However, it seems that the number of flights has been restored now due to the re-registration of aircraft stolen by russia. This means that the flow of migrants will most likely remain large.

Among the measures of state support for business, one can note the introduction of a moratorium on inspections of entrepreneurs until the end of 2022.

Banks realize that the inflow of foreign currency will decrease, so they have already begun to increase the percentage on foreign currency deposits in order to attract foreign currency. By the way, free access to the conversion of the Tajik currency into dollars is available only for the import of vegetable oil, flour and medicines. Banks do not give foreign currency for others aims. There are long queues for currency conversion in banks.

Imports from the russian federation continue to arrive, banks are selling rubles.

What products in Tajikistan have risen in price most sharply?

Sugar and pasta from the russian federation, as well as fertilizers, have risen in price more than others. The increase in prices for other products was within 20% due to changes in the exchange rate.

Prices for imported vegetables and fruits also rose in line with the exchange rate, but prices for local products did not change much, except for normal seasonal changes.

Conclusions

The rest of 2022 will be challenging for Tajik consumers as the war in Ukraine drags on, sanctions against russia continue to escalate, and global food and fossil energy markets become increasingly tense and unpredictable.

Tajikistan will be most affected by trade restrictions imposed on grain and other basic products by major supplier countries. As for the macroeconomics, the impact of a decrease in the country’s income from remittances from migrants will be tangible. This may have a negative impact on the construction and some other related industries.

Producers of vegetables and fruits may also feel the negative consequences of a decrease in effective demand for their products in russia, belarus and Ukraine.

Сообщение Tajikistan: Food security and macroeconomic stability under threat появились сначала на EastFruit.

EastFruit analysts note that prices for Georgian consumers continue to grow at a very fast rate. The annual inflation rate in February 2022 was 14%, which is about 5 times higher than the inflation target of the National Bank of Georgia. Food prices are worrisome.

In February 2022, the Georgians had to pay 17% more for food and non-alcoholic drinks than last year.

Data source: GeoStat, National Statistical Service of Georgia

The prices of goods and services have been rising rapidly for some time now. Food prices have been rising especially fast since 2019, due to currency devaluation, political tensions, the COVID-19 pandemic (since 2020) and related issues.

What is most interesting right now is that the prices of many mass-produced vegetables, fruits, and nuts are far above the average food price increase and target inflation.

Data source: GeoStat, National Statistical Service of Georgia

Georgian consumers have to pay, on average, around 30% more for the products on the table. Some have fallen in price compared to February 2021. Lemons, oranges and onions fell by 2-15% in February. Their prices are highly dependent on imports, and import volumes increased significantly in January-February 2022 compared to the same period in 2021.

The main problem with unusually high inflation rates is that household incomes are not growing as fast as prices. While it is impossible to live without food, people may stop consuming some other things and services. Thus, to consume the same amount of food, Georgian citizens need to spend less on other goods and services. However, Georgian farmers will suffer: people who work in other areas also need food. If sales in their sector fall sharply, the same will happen to their incomes, meaning that purchasing power will decrease. Some may change their consumption patterns and switch to cheaper products.

According to the National Bank of Georgia, it was expected that inflation in Georgia would start to slow down in 2022, but so far the expectations have not been met. The current high prices are the result of global problems, not problems specific to Georgia. Inflation is an issue everywhere, but it is much higher in Georgia due to an underdeveloped supply chain. While commodity prices have generally risen, Georgia is likely to be hit the hardest by the price of crude oil, which is at the highest level in the global markets for the last 6 years. The latter, of course, is connected with russia’s unjust war against Ukraine.

Looking ahead, we note that there are some concerns about the reduction in foreign demand. Georgia has significant exports to Russia, which are likely to decline, given the sanctions. Finding other markets and bringing the supply chain up to higher standards will take time. Some Georgian farmers who have exported to Russia will have to sell their products on the local market. This will put downward pressure on food prices. However, the overall picture of food prices in Georgia remains blurred amid the war in Europe.

Сообщение Consumer prices are skyrocketing in Georgia появились сначала на EastFruit.