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Gloomy forecast: Prices will continue to grow in 2024

Price increases in Kyrgyzstan have been breaking records since 2020. The authorities are trying to change the situation somehow, but it’s not working very well. After all, the republic is highly dependent on imports, so the situation on world markets immediately affects it.

The forecast for 2024 is a bit encouraging: prices will rise, but not so fast.

Experts expect inflation to be below 10 percent by the end of the year. This is due to the fact that the situation on the energy and food markets is relatively stable.

Prices will still rise

Gulnara Uskenbaeva, head of the Association of Suppliers, said that prices would gradually rise for almost all products and goods over the course of the year. No spikes are expected, but we shouldn’t expect a decrease in price either.

Everything will slowly rise in price, because the dollar rate is changing. But, traditionally, no one plans to raise prices sharply.

Gulnara Uskenbaeva

Sharp jumps are possible only in case of price changes on the world commodity exchanges. But there are no preconditions for that so far.

«There are still problems with logistics. This will be the case until alternative ways of delivering goods to Kyrgyzstan are developed. Nothing here is likely to improve in 2024,» the head of the Association of Suppliers concluded.

The Eurasian Development Bank believes that inflation in Kyrgyzstan will be 7.8 percent in 2024.

«We expect pro-inflationary factors to prevail in early 2024, such as high consumer activity and rising import prices for grains, fuels and lubricants. As consumer activity weakens and the new grain harvest becomes available, we should expect inflation to slow down. Balanced economic growth in the medium term will create prerequisites for a slowdown in inflation to 6 percent by the end of 2025,» Aigul Berdigulova, Senior Analyst at the EDB’s Country Analysis Center, said.

All depends on stock exchanges and weather

The National Bank monitors price stability in Kyrgyzstan. The central bank’s task is to keep inflation at 5-7 percent. And it seems achievable for the first time since 2020.

«It is expected that the emerging dynamics of gradual reduction of the inflationary background in Kyrgyzstan in 2023 will continue in 2024. One of the main factors will be the downward trend in the world food markets and restraining monetary policy of the central banks in the region. The National Bank, based on the analysis of economic factors, external and internal trends, in 2024 intends to keep inflation near the upper limit of the medium-term target,» the National bank of the Kyrgyz Republic said.

The bank stresses that one of the factors influencing prices is still the country’s dependence on imports of goods and services.

Therefore, price fluctuations in the world commodity markets, especially for food and energy, can have a significant impact on domestic prices. Climatic conditions in the region last season had a restraining effect on the volume of agricultural production.

«Given the commodity structure of consumption, changes in production and supply of agricultural goods, they certainly influence inflation. However, it is limited due to the openness of the domestic consumer market,» the National Bank noted.

Favorable situation in the world food markets compensates for the possible deficit of agricultural products in our region and in Kyrgyzstan, in particular.

National Bank of the Kyrgyz Republic

«Potential increase in inflation rate caused by a possible rise in prices for agricultural goods may offset the emerging slowdown of price increase in world food markets and the corresponding slowdown in prices for certain goods in Kyrgyzstan. But there is still uncertainty in the external environment, which can have both positive and negative impact on the price level in the country,» the National Bank concluded.

Prices for coffee and rice will rise

Experts name alcohol, tobacco, coffee, rice and some types of meat among the products, the prices for which may rise in 2024. This is due to poor harvests, changes in currency exchange rates and the rise in the cost of delivery of goods due to complex logistics.

Alcohol and tobacco products traditionally rise in price due to an increase in minimum retail prices for them. The authorities take such steps to reduce their harmful impact on public health.

Coffee began to rise in price at the end of October 2023.

More than 80 percent of coffee exports to the world market come from Brazil, Vietnam, Colombia, Indonesia and Honduras. Due to the drought in Brazil, the cost of futures, for example for robusta, rose by 42 percent, Pavel Seleznev, dean of the Faculty of International Economic Relations at the Financial University under the Government of the Russian Federation explained.

The situation is similar in the global rice market — due to drought, the next harvest could be the lowest in the last 20 years.

India and Thailand have closed rice exports because of the poor harvest. As a result, its prices may rise by 20 percent. Price of rice began to gradually grow in the fall of 2023 and this year, unfortunately, the trend will continue.

What to expect from fuel

Kyrgyzstan also imports fuel. Yes, supplies are duty-free, but global oil prices affect the cost of fuel and lubricants in the country. The Eurasian Development Bank expects the price of Brent oil to decline by 2-5 percent per year. The main factor is the global economic slowdown.

«Given the termination of the agreement on voluntary limitation of oil production, we expect the price of Brent oil to decline from $83 per barrel in early 2024 to $74 in 2026,» the EDB said.

Kyrgyzstan buys almost all fuel in Russia, so the situation in the republic will depend on the prices in Russia.

Russian fuel market expert Anastasia Bunina believes that fuel prices in Russia in 2024 will largely depend on the inflation rate and currency exchange rate.

«If the ruble will gradually drop against the dollar and euro, the cost of gasoline will be higher, because fuel is traded in dollars on the exchanges,» she noted.

According to the expert, fuel prices will remain at the current level until spring. But she does not rule out that if the geopolitical situation changes, the cost of gasoline in Russia may rise by 6-8 percent.