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Kyrgyzstan's GDP growth may reach 4.3-4.5 percent in 2021

The Eurasian Development Bank (EDB) predicts that Kyrgyzstan’s GDP will grow by an average of 4.4 percent per year in 2021-2022 after declining by 5.9 percent in 2020. Macroeconomic review for the republic, prepared by the Directorate for Analytical Work of the bank says.

It is noted that the republic’s economy declined by 5.3 percent in January-June this year.

The effect of quarantine restrictions within the country, a decrease in external demand and difficulties with transportation, as well as a decrease in the inflow of remittances from labor migrants caused a contraction in consumer demand and investment.

«Closure of borders with China at the beginning of the year predetermined a decrease in inventories, which caused an additional reduction in gross capital formation. Together with the change in consumer habits, return to the pre-crisis level of production is expected during 2021-2022, and the output gap will remain negative over the entire forecast horizon. The decline in GDP in 2020 is estimated at 5.9 percent, growth in 2021-2022 — at 4.3-4.5 percent,» Aigul Berdigulova, Senior Analyst at the EDB said.

The growth rate of the consumer price index in the first half of this year somewhat accelerated under the influence of the exchange rate pass-through, temporary rush demand of the population for certain goods and a rise in prices for grain and grain products. By the end of 2020, the authors of the survey expect inflation to rise to 5.9 percent, mainly due to the depreciation of the national currency and a rise in the cost of food products.

Restricted internal and external demand for durable goods will significantly limit inflationary processes in the medium term.

As a result, with stabilization of exchange rate dynamics, the growth rate of the consumer price index will slow down to 4.1 percent by the end of next year and will begin to gradually recover as disinflation factors weaken.

The review stresses that the risks remain elevated and biased towards worsening of the forecast due to the instability of the emerging recovery in economic activity against the background of the continuing threat of a large-scale second wave of the pandemic, exacerbation of US-Chinese relations and increased sanctions rhetoric against Russia. The negative influence of the latter can be transmitted to the economy of the Kyrgyz Republic through the channels of remittances and trade.

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