In 2021, the global economy started to emerge from the recession caused by the pandemic, the World Bank experts reported. The same analysts speculated the South Caucasus GDP would increase by 4.2% by the end of the year, but in practice it grew by 7%.

The economists could not have predicted the mass migration from Russia following the beginning of the full-scale invasion of Ukraine. According to different estimates, between several hundred thousand and a million people left Russia last year. Usually, Russians would depart for less wealthy countries or nations with lenient migration policies, economist and former president of Russia’s New Economic School Ruben Enikolopov says.

Russians had the biggest impact on Armenia’s economy. According to the World Bank forecast, by the end of 2022 Armenia’s GDP was supposed to increase by 4.8%, instead it grew by 12.6%, as per the data provided by the International Monetary Fund (IMF). This is one of the highest results in the world.

In a conversation with Novaya-Europe, economist Suren Parsyan confirms that the growth is related to the arrival of Russians, in particular those who work in IT. In total, Russians transferred $1.75 billion to Armenia in 2022.

Georgia ranks second on the list of countries with the biggest difference between the forecast and the actual growth of GDP. According to the data published by the National Bank, the country received around $3.6 billion from Russians via money transfers, tourism, and export of goods — this number makes up 14.6% of all Georgian economy. As a result, Georgia’s GDP grew by 10.1%.

In Kyrgyzstan, real indicators of economic growth reached 7%. The country also documented a growing cash flow due to the arrival of Russians. By the end of 2022, the total sum of bank transfers from Russia amounted to $2.8 billion, as per the National Bank of Kyrgyzstan.

According to the University of California professor Oleg Itskhoki, the growth of GDP in all of these countries demonstrates that the Russians who came there had savings; they were, on average, wealthier than the local residents. The emigrants created demand in the market of goods and services which in turn impacted GDP.

Kazakhstan was the only country where the growth of GDP did not differ from the forecast. As the Renaissance Capital chief economist for Russia and CIS Sofia Donets told Russian media outlet RBC, this result has to do with the size and structure of the Kazakh economy. For example, GDP equals $6,600 per capita in Georgia, $6,500 in Armenia, but $11,400 in Kazakhstan. Furthermore, Kazakhstan’s authorities put their stake on the industries and not on the service sector.

Serbia was the only country popular among Russian emigrants that saw its GDP go below the World Bank forecast. The expected economic growth of Serbia was 4.5%, however, according to the IMF and the National Statistics Bureau, it ended up being 2.5%. Enikolopov and Itskhoki believe the decline happened in part due to energy prices rising eight- or ninefold. Another thing to consider is that fewer Russians moved to Serbia compared to Georgia and Armenia.

However, if it wasn’t for emigrants, the country’s GDP would’ve crashed, Itskhoki says. The local authorities also confirmed the impact of Russian nationals on the economy. Serbian Prime Minister Ana Brnabić said that “qualified” software engineers who had previously worked in foreign companies moved to Serbia.

The difference between forecasts and the actual numbers was noticeable in other countries, too. For example, Turkey’s GDP was 5.6% — the estimates put it at 2%. The Economic Policy Research Foundation of Turkey calculated that Russians had registered over 1,300 companies in Turkey in 2022 (which is almost eight times as many as in 2021).

Still, it’s hard to determine what impacted the local economies more — the mass arrival of migrants or the increased trade with Russia. All of these countries became hubs for the re-export of various goods to Russia because of the sanctions introduced due to the war in Ukraine, Itskhoki says (for example, the export of goods from Turkey quadrupled). He estimates that the emigrants and parallel imports had about an equal impact on the growth of GDP.

Moscow prices

Another consequence of the flow of Russians has been the rise in prices for goods and services. Among the countries that Russian citizens migrated to most often, Turkey has recorded the highest level of inflation. By the end of 2022, according to the World Bank data, the inflation rate amounted to 72.3%. But in Turkey’s case, Russian immigrants weren’t the reason why. The experts believe the inflation rate is connected to the weak Turkish lira and the low interest rate remaining unchanged by the Central Bank.

In Kyrgyzstan, the 2022 inflation rate was 14.7%. As per the National Bank, the figure was impacted by the announcement of an upcoming rise of utility prices.

When it comes to Georgia, Serbia, and Armenia, the situation is more ambiguous. Georgia’s National Office reported a 12% inflation rate. Economist and member of the Girchi political party Alexandre Rakviashvili says that this rate of inflation was a trend that started in 2019 and that Russians had no impact on it.

However, the migrants’ impact on inflation can be tracked down to the rise in prices on various goods and services that they consume, Enikolopov says. For example, alcohol, tobacco, and housing prices increased in Georgia, flat equipment and restaurant prices grew in Serbia, while food and clothes became more expensive in Armenia.

All the countries that Russians moved to saw an increase in rental prices, Itskhoki says. For example, rental prices increased by around 70% in Tbilisi in 2022 compared to 2021, according to analysts of the TBC Capital Bank. This data is confirmed by the Numbeo statistics, which demonstrate that, on average, renting a flat in Georgia now costs $779.1.

Rental prices increased by 57% in Armenia. The average price of renting in this country was the most expensive in our sample — $956.5.

By the end of 2022, the inflation rate in Armenia reached 8.6%. Economist Narek Karapetyan ties the reasons for inflation to the influx of Russians: this led to a rise in utilities, services, and real estate prices.

In both Serbia and Kazakhstan, the price of renting increased by 24%. It costs over $600 per month to rent a place in these countries now.

Somehow, rental prices increased the least in the country with the biggest inflation rate. Turkish landlords raised their prices only by 16.4% (on average, up to $369.7 per month).

A positive shock

Following 24 February 2022, the authorities of host nations had to face not only the short-term influx of money into their countries but also think about the future. As a rule, Armenia, Georgia, Kazakhstan, and other Central Asia countries are thought of as “transit points” by Russians, which is confirmed by the statistics published by the local Ministries of Internal Affairs and statements by politicians. This means that if the Russian migrants leave, the local economies could shrink again.

The prices of rent and various services go down, but so will the general demand impacted by the migrants.

The government of Kyrgyzstan is trying to attract Russian IT employees through the Digital Nomad programme which offers tax benefits. The local Ministry of Economy and Commerce justified the initiative by saying it’s an opportunity for “investment prospects and creating new jobs”. However, only around a thousand of foreigners had received the nomad status by February 2023. The other countries housing Russians are basically not taking any concrete steps to keep the migrants there.

Ruben Enikolopov believes that mass departure of Russian migrants could be the biggest risk for the economies of the countries they had fled to. According to him, their potential return home will depend on what’s going to happen in Russia which is “impossible to predict”. The economist speculates that only highly qualified professionals will be able to leave these countries for others, seeing as no one is really waiting for them in Western Europe and the USA.

Still, the economic impact of last year’s migration is more of a positive one, the economists agree.

“It may seem that 2022 was the ‘boom year’ and that 2023 will be even worse. But if we take a look at people’s collective wealth, then this was a positive shock to these countries,” summarises Itskhoki.