The foreign exchange market of Kyrgyzstan was ailing in 2022. The hardest was the end of February, when the dollar exchange rate against the som exceeded 100 soms. Later, the situation stabilized, but the fears of citizens and problems with the purchase of foreign currency remained.
Economists expect a slight weakening of the som in 2023, but their opinions differ on how strong it will be.
24.kg news agency asked the analysts what, in their opinion, the rate of the American currency would be in 2023.
How much is the dollar?
The Eurasian Bank presented its forecast for the growth of the economy of Kyrgyzstan this year, including the exchange rate. The bank’s experts expect a gradual depreciation of the Kyrgyz som against the dollar.
The exchange rate of the som will be at the level of 82–84 soms for $1 during 2023.
Analysts of the Eurasian Development Bank
«Weakening of the exchange rate in the medium term will partly be facilitated by the monetary policy of the National Bank. In the long term, influence of fundamental factors will cause depreciation of the som by about 2 percent per year,» the EDB noted.
Economist Azamat Akeneyev has a more pessimistic outlook. He believes that depreciation of the som will begin in Kyrgyzstan, which was predicted back in 2022. The situation in the Russian economy and the global trend towards the strengthening of the euro and the US dollar will have an impact on the national currency.
During the first quarter, I expect the som to drop by 10-15 percent to 90-100 soms for $1.
Azamat Akeneyev
«It will be difficult to keep the rate of the som at the level of 2022. It will follow the ruble. I think there will be a creeping devaluation. There will be no sharp drop. In addition, European and American banks are pursuing a policy of strengthening their currencies. And first of all, this will affect developing countries, including Kyrgyzstan,» the economist emphasized.
What will the National Bank say?
Traditionally, the National Bank does not provide forecasts for the dollar to som exchange rate. The bank notes that since 1993 the country has had a floating exchange rate regime. According to it, the exchange rate of the national currency is formed on the basis of supply and demand for foreign currency.
At the same time, the National Bank of the Kyrgyz Republic named reasons that may affect the exchange rate:
- Economic situation in the republic;
- The current state of the trade balance;
- Inflationary expectations (consumers’ assumptions about price increases in the future);
- The level of confidence and expectations of financial market participants regarding future prospects, which is also related to the current US dollar situation in global financial markets;
- Change in the level of business activity of trade partners of Kyrgyzstan;
- Income from labor migrants outside the country.
There are also seasonal factors. For example, importing companies become more active most often at the beginning of the year and after the summer period. They need to pay under contracts and conclude new ones.
Receipts from the tourism industry also influence the exchange rates. One-time factors may also affect the rates. These are for example large government projects that require foreign currency payments or foreign currency conversion by large taxpaying companies to replenish the state budget.
In some periods, the situation is influenced by the political situation in the country.
What the rate of the Russian ruble will be?
In addition to the US dollar, it is worth paying attention to the forecasts for the value of the national currencies of the closest neighbors — Russia and Kazakhstan. It is with these countries that Kyrgyzstan has the largest volume of trade.
The situation in Russia has a special influence on the situation in the foreign exchange market of Kyrgyzstan.
«Last year’s developments showed that we have almost 100 percent correlation with the ruble exchange rate. In the last two weeks of 2022, the ruble weakened against the dollar. I think the latest package of sanctions, which set price ceilings for Russian oil and gas, will lead to the devaluation of the ruble. But this will happen gradually,» economist Azamat Akeneyev says.
The Eurasian Development Bank predicts the average annual exchange rate of the Russian ruble against the dollar at about 68.4 rubles.
At the same time, the bank notes that the overvaluation of the ruble will decrease as the foreign trade surplus shrinks and with the start of applying the updated constructions of the budget rule.
Chief Economist for Russia and the CIS Sofya Donets and Economist for Russia and the CIS Andrey Melashchenko at Renaissance Capital believe that in 2023 the exchange rate of the Russian ruble against the dollar will be at the level of 70-75 per $1 under the baseline scenario.
Analyst of Finam Financial Group Alexander Potavin expects that during 2023 the ruble exchange rate will remain unstable. One should not exclude both the rise in the dollar exchange rate to 80 rubles, as well as its gradual decline to 65-68 rubles.
How much tenge will cost?
Experts of the Eurasian Development Bank expect that the annual average rate of the tenge will be 485.6 for $1. The dynamics of the rate will be formed to a greater extent under the influence of fundamental factors.
The dynamics of the tenge exchange rate will become more stable in the medium term.
Analysts of the Eurasian Development Bank
«A moderate weakening of the tenge is expected in the context of restrained growth in exports and an increase in imports. In addition, higher inflation in Kazakhstan compared to trading partner countries will contribute to the depreciation of tenge,» the EDB noted.
Economist Almas Chukin is sure that a slight change in the exchange rate of the tenge against the dollar in 2023 is inevitable.
«A slight decrease within 2-3 percent is expected (this is 10-15 tenge). As for the crisis collapse, we can say that everything is possible in our world, but the probability is very low. Therefore, as an economist, I would not count on it. There will most likely be a revaluation against the ruble, that is, a strengthening of the tenge,» the economist said.
Leading analyst of the Association of Financiers of Kazakhstan Ramazan Dosov noted that the national currency of the Republic of Kazakhstan in 2023 may weaken within the average annual values. But a lot depends on prices in the oil market, as well as on the monetary policy of the US Federal Reserve.
«According to the expectations of financial market experts, the dollar may rise to 497.1 tenge in 2023, which is 5.7 percent higher than its current level. Further «cooling» in the global raw material market and continuation of the policy of high rates in the US may also put pressure on the tenge. The expected weakening of the Russian ruble and the difficult geopolitical situation in the region may negatively affect the national currency rate,» the analyst concluded.
