The escalation of the crisis on the Crimean peninsula is already taking a toll on Russia. The economy was doing little more than stagnate even before geopolitical tensions flared up. And large scale private sector capital flight of around $70bn in Q1 alone (higher than in the whole of last year) could cause growth to weaken even further. While concerns about the Ukrainian economy are running high, elsewhere in the region the economic impact of the crisis seems to be contained, even if the financial markets have been volatile. Indeed, activity data from the start of the year suggest that the recovery has strengthened in most countries.
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