Forecasts of the world financial institutions and experts about the development of the economy of Kyrgyzstan have come true. GDP growth turned out to be more modest than a year earlier. Even the state-owned Kumtor did not give the impetus that everyone was waiting for.
The important event of 2023 was that the country’s GDP exceeded 1 trillion soms.
In the past year, the republic continued to increase imports, maneuver between the desire to earn money and the possibility of falling under sanctions, and experienced rallies of market vendors against the abolition of licenses.
Another significant economic event was the introduction of an emergency situation regime in the energy sector.
There is growth, but slow
At the beginning of last year, the Asian Development Bank predicted a slowdown in Kyrgyzstan’s GDP growth. It was said that geopolitical events could affect economic growth and inflation through remittances, exchange rate fluctuations, trade and financial ties.
Other global financial institutions were of a similar opinion.
These forecasts have come true: economic growth will be 4.5-4.7 percent by the end of 2023.
«In the past year, the tough global financial environment and lower external demand had a generally negative impact on economic growth in emerging markets and developing economies. The risks of deterioration are due to such factors as geopolitical tensions, conflicts, the impact of secondary sanctions and significant climate change in the region. Kyrgyzstan as an open economy was naturally influenced by these external factors. Nevertheless, the country’s internal potential and adaptation to external and internal factors made it possible to ensure sustainable economic growth,» the Minister of Economy and Commerce Daniyar Amangeldiev said.
His ministry expects GDP to grow by 4.5 percent by the end of the year, and inflation to be around 10 percent.
Secret Kumtor
The country’s main gold project — Kumtor mine — officially belongs to Kyrgyzstan for the second year. Has it made our lives better? It’s hard to say. Even after the abolition of the external management regime, the mine’s work has not become open and transparent.
«Every gram of gold and drop of water is under my control,» the President Sadyr Japarov said at the second People’s Kurultai.
It is impossible to say how much this corresponds to reality and whether the enterprise now works better than it did under the Canadians.
Only Kumtor’s report for the first quarter of 2023 is publicly available.
The data in it say the contrary. There is a decrease in payments to the budget, and the growth of the cost of gold, and an increase in the number of employees. After public criticism, the authorities have repeatedly stated that everything was fine. But there is no detailed confirmation of this.
It is only known that for ten months of last year the Kyrgyz Republic has exported almost 13 tons of gold. And Kumtor transferred 25 billion soms in taxes and payments to the budget.
How to survive under sanctions
Kyrgyzstan has been living between the desire to make money on sanctions against Russia and the likelihood of falling under them itself for the second year already. European and U.S. diplomats have repeatedly warned that such an option is possible. They asked to be extremely careful, but in vain.
In 2023, five Kyrgyz companies were placed on the U.S. government’s sanctions list for cooperation with Russia.
The decision was made because of the supply of prohibited technologies, equipment and spare parts to the Russian Federation. Moreover, journalists found out that Ukraine supplies Russia with spare parts for airplanes with the help of a Kyrgyz firm.
The authorities of the republic claim that they comply with all recommendations. However, the events of last year show that the desire to make a profit still prevails. As a result, Kyrgyzstan is walking on thin ice, literally on the edge of the threat of secondary sanctions against the entire country.
Increasing imports
Another feature of Kyrgyzstan’s economy that has been observed for the second year in a row is the large volume of imports. In the first nine months of 2023 alone, Kyrgyzstan imported goods for $7,556.3 billion (up 23.3 percent).
The large volume of imports is not surprising in itself. After all, the republic does not produce much itself. Much has to be purchased from outside. But there are very unusual items in the structure of imported goods. Sometimes it is difficult to find the countries where the goods come from on the map, let alone imagine the route of the goods to the Kyrgyz Republic.
The data show a sharp increase in imports of cars from China — 35 times.
Many experts say that two factors may play a role here — easing imports of electric cars and banal re-exports. Kyrgyzstan is among the leaders in car exports to Russia. There are already questions about this growth. The Russian authorities are not satisfied with the practice of importing cars through the republic with a significant underestimation of the price. Many experts pay attention to the current situation in the automobile market. Cars that have received customs documents in the Kyrgyz Republic are imported into the country en masse.
«This is parallel import. This state has the most favorable conditions for customs clearance within the EAEU. Including local specifics and sanctions allow underestimating the value of the car, based on which the customs duty is paid. The last aspect may lead to the fact that end buyers may simply lose their cars,» Noviye Izvestia reports.
According to a blogger Mikhail Zhukhovitsky, a car delivered to Kyrgyzstan actually costs $80,000. But at customs in Kyrgyzstan they present a document stating that the price of the car is only $30,000. The duty is paid on this amount.
Rallies and emergency situation
The past year was also remembered for another attempt of Kyrgyzstan’s authorities to get away from the licenses system. The attempt failed. It is not so easy to force vendors to play by the common rules. They are not ready to wait for the Tax Service to fix its systems. But they are good at defending their point of view. At rallies.
In 2023, after a week of rallies, the authorities abandoned the idea of abolishing licenses for trade.
However, for the time being, for six months. The president of the country and the head of the State Committee for National Security threatened the owners of the markets with external control if the entrepreneurs are not ready by the summer of 2024.
Another important event that happened last year in the republic’s economy was the introduction of an emergency situation regime in the energy sector. It will be in effect until December 31, 2026. The authorities promise to build new power plants and solve the problems with the shortage of generating capacity by this year.
Growth will be moderate
The Eurasian Development Bank (EDB) improved its forecast for Kyrgyzstan’s GDP growth in 2023-2024 from 4.1 percent to 4.5 percent. EDB noted that the republic’s economy is gradually returning to a balanced growth trajectory.
The exhaustion of the positive effects of the migration shock seen a year earlier and a decline in the production of basic metals slowed GDP growth down.
«At the same time, consumer activity has increased due to higher wages in the public sector, growth in lending and expanding demand from tourists, whose inflow increased fivefold,» Senior Analyst of the EDB’s Country Analysis Center Aigul Berdigulova commented on the forecast.
She noted that in 2024 the country’s economy will be supported by high investment activity. The cooling of domestic demand due to the persistence of tight monetary conditions in the first half of the year and the planned budgetary consolidation will have a restraining effect on GDP growth.
