Publication: Kyrgyz Republic Economic Update: Special Topic: Food Price Inflation in the Kyrgyz Republic
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2024-07-25
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2024-07-25
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In the first half of 2023, real economic growth in the Kyrgyz Republic decelerated to 3.9 percent, down from 6.3 percent in 2022, due to a decline in remittance receipts and a cyclical slowdown in gold and agricultural production. The slowdown in growth this year has generally mirrored the trends in most other economies in the Caucasus and Central Asia. It is mainly attributable to the reversal of favorable cyclical factors on the supply side of the economy, which had boosted output of agriculture and gold in 2022, and a reduction of 29 percent in remittance receipts (most of which are sourced from Kyrgyz migrant workers in Russia), which constrained household consumption on the demand side. Tourism and the emergence of a substantial transit trade with Russia have supported growth in some of the service industries, and there were also indicators of a recovery of fixed investment expenditures in the first half of 2023. The stabilization of food prices will also benefit from supply-side measures to address market failures and improve the overall performance of the agricultural sector. These include, among others, improving the functioning of input markets and service provisions (for example, agricultural advice, transport, and marketing services), reducing high transaction costs (associated with access to essential inputs and services such as water, electricity, extension services, and logistics), and addressing information asymmetries leading to weak linkages between small farms and enterprises. Government interventions in these areas are needed to improve small farmers and agri-food processors’ access to markets and to create more opportunities to capture value and improve their livelihoods.
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“World Bank. 2024. Kyrgyz Republic Economic Update: Special Topic: Food Price Inflation in the Kyrgyz Republic. © World Bank. http://hdl.handle.net/10986/41955 License: CC BY-NC 3.0 IGO.”
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Publication Kyrgyz Republic Biannual Economic Update, Fall 2015(World Bank, Washington, DC, 2015-10)GDP grew at a rate of 6.8 percent, year-on-year (y/y), between January and August, boosted by frontloaded gold production and a strong performance of the agricultural sector. Gold output grew by 46 percent (y/y), while the non-gold GDP growth rate reached 4.5 percent, up 0.9 percentage points from the same period in the previous year. However, gold production is projected to decelerate markedly during the remainder of 2015, while increasingly adverse external conditions and exchange-rate developments are expected to depress domestic consumption and private investment, as well as foreign demand. As a result, the overall growth rate for 2015 is projected to slow to 2 percent. As of August the headline inflation rate had fallen to 5.8 percent (y/y) from 10.5 percent at end-2014, but the combined effect of higher public spending and exchange-rate pressures are expected to drive up prices during the final months of the year, underscoring the importance of maintaining a tight monetary stance. Looking beyond 2015, the Kyrgyz economy is projected to recover over the medium term, and public finances are expected to stabilize, but this generally positive outlook is subject to significant downside risks. In the baseline scenario, growth is projected to accelerate to 4.2 percent in 2016, driven by higher gold production and an expected acceleration in regional economic activity. Growth in the non-gold sectors should be relatively robust at around 3.7 percent, but a slower-than-anticipated recovery in Russia and Kazakhstan could threaten this projection. Moreover, slower growth in both the domestic and regional economies could complicate the process of fiscal consolidation.Publication Kyrgyz Republic Economic Update No. 8, Fall/Winter 2018(World Bank, Washington, DC, 2019-02-07)Real GDP growth slowed to 3.1 percent in January-November 2018 from 3.7 percent in the same period of 2017. This deceleration was the result of slower growth in both gold production and non-gold industry. Export performance remains weak, largely on account of a sharp slowdown in gold exports, and in spite of trade opportunities within the Eurasian Economic Union. Attracting private investment remains a challenge. Recent developments point to limited progress in addressing structural issues over the past few years. While the Kyrgyz Republic was able to avoid an external shock driven recession in 2014-15, the economy remains vulnerable to external economic shocks given its high dependence on an undiversified export base, workers’ remittances, and foreign aid.The fiscal position has improved with a strong tax revenue performance and cuts to capital outlays. This has helped keeping public debt under control following a sharp increase in 2014-15. With inflation pressures low, the monetary policy stance remains relaxed. The National Bank reduced its policy rate by 25 basis points to 4.75 percent in May 2018 to support economic growth and has maintained a managed float of the exchange rate.Going forward, real GDP growth is forecast to accelerate slowly to 3.9 percent by 2020 supported by all the major sectors – industry, agriculture, construction and services. On the demand side, growth is projected to be driven by private consumption, investment and exports. The economy will continue to benefit from large remittance inflows and firming external demand. Strong remittances will support average consumption growth of around 3 percent in 2018–20. However, the current account deficit is projected to remain elevated at about 9 percent of GDP, reflecting structural constraints, the significant import content of public investment, and an indirect feed-through effect of remittances via imports. To rebuild fiscal buffers, the authorities are committed to reducing the deficit to 3 percent of GDP by 2020.Publication Kyrgyz Republic Economic Update No. 7, Spring/Summer 2018(World Bank, Washington, DC, 2018-07)Economic growth was robust in 2017, above expectations. This was thanks to favorable external developments in the region, continued expansionary fiscal policy, and growth in the gold sector. Real GDP growth reached 4.6 percent in 2017, up from 4.3 percent in 2016, and the fastest rate since 2013. During the first 4 months of 2018, growth slowed to 1.3 percent, from a year earlier, as a result of the contraction in gold production; excluding gold, output grew at 2.5 percent, up from 2.3 percent over the same period in 2017. In short, the economy appears to have fully recovered from the recent shock brought about by the fall in oil prices. Investment and consumption drove output growth last year. Sources of growth appear to have been balanced. Growth was mainly driven by consumption and investment, with: private consumption growth returning to positive territory, after two consecutive years of contraction and high rates of public and private investment. Net exports also made a positive contribution, thanks to robust export growth. With the regional downturn now over, it is time the authorities should seize the opportunity for fiscal reform. First and foremost, action is required on the fiscal side to increase discipline and policy quality, transparency and consistency. In the past years, the authorities have deliberately delayed planned fiscal consolidation to accommodate the external shocks. As a result, public debt has remained elevated and fiscal buffers have been depleted. Moreover, fiscal discipline (in the context of relaxed targets) has been achieved at the cost of ad hoc measures, which entail reduced spending efficiency. It is now time to reverse this trend through implementing the recently adopted fiscal rule, tax administration reform and concrete measures to contain recurrent spending (to preserve room for investment). Additional steps to improve spending quality, include ensuring that planned amendments to the Public Procurement Law safeguard best international practice and that steps are taken to improve public investment management. In the long run the core challenge is to increase overall productivity in the economy. Creating and preserving fiscal space for investment in infrastructure is key, including via reforming energy tariffs. Significant long-term payoffs can also be expected from implementing the ambitious digital agenda under the Taza Koom flagship program. The Special Focus section of this report highlights the main challenges the country will face in this regard.Publication Kyrgyz Republic Economic Update, No.9, Fall 2019(World Bank, Washington, DC, 2019-12)Gold production increased substantially in 2019, providing a strong boost to economic growth. Output from the country's largest gold mine, Kumtor, rose by 33 percent year on year in January-October, a reversal from the 8 percent contraction in the same period of 2018. As a result, real GDP grew by 5.7 percent in January-October, up from 3.5 percent in 2018 as a whole. Gold exports, which increased by almost 55 percent year on year, contributed to strong export earnings and a narrower current account deficit. Monetary policy easing and continued remittance inflows also supported GDP growth. Real GDP is projected to grow by 4.2 percent in full-year 2019, as gold production growth is slowing in the last three months of the year. Economic activity is likely to keep the same pace in the medium term as gold production volume will stay at the current level. The current account deficit is expected to remain wide despite rising remittances. The fiscal deficit widened slightly in January-September 2019 owing to lower tax revenues as a percentage of GDP (mainly due to reduced receipts from import taxes). As investment spending accelerates in the second half of the year—and a 30-percent wage increase for teachers took effect in October— the budget deficit is likely to widen to 3.2 percent of GDP in 2019 from 1.6 percent of GDP in 2018. The government plans to reduce the fiscal deficit to 3 percent of GDP in 2020 in line with the fiscal rule; the latter is currently pending parliamentary approval. Improving expenditure management has been a key challenge in the Kyrgyz Republic, especially in the context of the need to create the much-needed fiscal space for investment in infrastructure and human capital. The special focus section explores the main issues related to public investment management and discusses how to enhance the selection, assessment, and evaluation processes of public investment projects.Publication Kyrgyz Republic Economic Update No. 1, Spring 2015(World Bank, Washington, DC, 2015-05)Growth in the Kyrgyz Republic slowed significantly in 2014, reflecting the deteriorating external environment and supply-side constraints. Economic growth fell to 3.6 percent in 2014 from 10.9 percent in the previous year, partly because exports to Russia and other neighboring countries plunged. Re-export businesses were affected as the Eurasian Economic Union (EEU) began to exercise stricter border control on goods imported from third countries. On the supply side, lower production at the Kumtor gold mine and a poor harvest due to adverse weather also depressed growth. The fall of the Russian ruble and the Kazakh tenge led to a significant depreciation of the Kyrgyz sum, which together with increases in energy tariffs drove inflation up from 4 percent in 2013 to 10.5 percent in December 2014. Although export growth was negative (–6.4 percent), imports declined even more (–7.2 percent), which, together with lower income outflows, helped to reduce the current account deficit from 15 percent in 2013 to 13.7 percent of GDP. The current account deficit was financed by borrowing and foreign direct investment (FDI). On the fiscal side, slower growth affected tax revenues, which were essentially flat at 25.3 percent of GDP but non-tax revenues went up by over a percentage point of GDP, to 6.7; together with grants, that brought total revenues to just under 35 percent of GDP. Meanwhile, a significant expansion of public investment spending brought the deficit to an estimated 4.1 percent of GDP in 2014, up from 3.9 percent in 2013, despite less spending on recurrent outlays. Higher spending and the depreciation of the sum translated into a significant increase in public debt, from 46.1 percent of GDP in 2013 to 53 percent for 2014. Job creation was stagnant. Poverty remained high: the most recent (2013) national estimates are absolute poverty 37.0 percent and extreme poverty 2.8 percent.
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