The Kyrgyz economy has shown resilience to the spillovers from the war in Ukraine. Concluding statement of the International Monetary Fund (IMF) following the results of the mission to the republic says.
Real GDP grew by 7 percent in the first ten months of this year driven by gold production, transportation, trade, and agriculture.
«Russia’s resilience to sanctions, and unanticipated migration of capital and labor from Russia to the Kyrgyz Republic appear to have muted the war’s adverse spillovers so far. In the first nine months of 2022 imports increased by nearly 80 percent, partly because of higher oil prices, but also due to an increase in transit trade while gold exports were negligible as most of the domestic gold production was purchased by the National Bank,» the statement says.
At the same time, IMF notes that the growth this year is projected to ease from 7 percent through October to 5.5 percent by year-end and to 3.5 percent next year, as the projected contraction in Russia starts to weigh on the Kyrgyz economy, while gold production of the Kumtor mine reaches capacity and activity in the agriculture sector slows from exceptionally high levels. Inflation is expected to remain elevated at about 15 percent this year due to strong wage growth and a temporary demand boost from the inflow of Russian migrants, and decline to about 10 percent only by end-2023 as food and energy prices moderate and remittances decline with the growth slowdown in Russia.
In the medium term, GDP is projected to converge to its potential growth rate of about 4 percent, and inflation return to mid-single digits, supported by adequately calibrated monetary policy. Immediate resumption of gold exports is critical to reduce the current account deficit to sustainable levels.
«Without additional fiscal space and concessional financing, large new infrastructure projects such as the China—Kyrgyzstan—Uzbekistan railway and Kambarata-1 hydropower plant would further increase public debt. These risks could be compounded by escalation of regional conflicts, the reemergence of the pandemic, shortages of power supply due to the ageing electricity infrastructure or a sustained reduction in gold prices. On the upside, a new wave of immigration from Russia could improve the short-term growth outlook,» the IMF statement says.
