Remittances from Russia to countries in Central Asia and Eastern Europe and the Caucasus contracted in the first quarter of 2014 for the first time since 2009, primarily because of the Russian economic slowdown, the EBRD said.
Uzbekistan and Moldova have been affected the most, while remittances to Armenia also slowed down significantly.
A fall in the volume of dollars being sent home had been partly offset by the rising purchasing power of remitted dollars following a weakening of the currencies in several recipient countries.
According to an index showing the overall economic exposures of a number of countries to Russia through various channels, Belarus and Tajikistan have the highest exposure to Russia, with significant exposure also seen in Armenia, the Kyrgyz Republic, Moldova and Ukraine.
The report said that in Central Asia the Kyrgyz Republic and Tajikistan were particularly vulnerable. In those two countries remittances make up 29 per cent and 49 per cent of GDP respectively, with the result that the impact of just a small drop in payments sent from Russia is substantive.
Any further dampening of growth in Russia from the introduction of new sanctions would increase the effect on growth in this region, the report added.
However, the impact could be offset, particularly in Kazakhstan, by increased exports to Russia following Russia’s decision to ban food and agricultural imports from the EU, US and a number of other countries.
Growth in Mongolia is expected to decelerate due to lower prices of key export commodities, delays to the second phase of the Oyu Tolgoi mining project and weaker investment activity. The EBRD cut its 2014 growth forecast for Mongolia sharply to 5.0 from the 12.5 per cent seen in May.