EBRD forecasts GDP growth in Kyrgyzstan by 7%

Bishkek, Sept. 28, 2022 / Kabar/. The Kyrgyz economy is on a vigorous recovery path, with GDP growing by 7.7 per cent year-on- year in the period January-July 2022, says in the latest Regional Economic Prospects of the European Bank for Development and Reconstruction (EBRD). Contrary to early expectations, the strong Russian Rouble and Russia’s record high demand for migrant workers resulted in remittances to the Kyrgyz Republic increasing by 11 per cent in the first half of 2022, supporting domestic demand and enabling growth in industrial production, hospitality, trade and trucking. Wage increases for public sector employees and strong demand for qualified labour, coupled with the government’s efforts at reducing informality, led to a more than 30 per cent increase in nominal wages – well above inflation (currently at close to 14 per cent). The country is also enjoying a significant increase in money transfers by Russian households seeking to obtain and replenish international payment cards, keep their forex savings abroad and finance “shadow imports” to Russia. Re-exporting of (mostly) Chinese goods to Russia has become a major business activity often undertaken by small

Kyrgyz companies and physical persons, helping spread the benefits across all population strata. Inflation remains a key challenge, however. Although the central bank raised the policy rate from 8.5 per cent in February to 14.0 per cent in March 2022, CPI inflation reached 13.8 per cent in July. On the positive side, higher prices and improvements in tax administration (introduced in January 2022) led to very strong growth in public revenues and a budget surplus of 2.4 per cent of GDP. The government’s success is settling the long-standing conflict over the Kumtor gold mine with Canada’s Centerra clears a major roadblock for gold exports and foreign direct investment (FDI), and in January-June 2022, incoming foreign direct investments doubled, reaching US$ 628 million. Further FDI is expected in major hydropower and railway projects in the coming years. Overall, the economy is likely to benefit from increased re-export opportunities, money transfers as well as relocation of Russian companies and individuals, justifying a forecast of 7.0 per cent GDP growth in both 2022 and 2023.