In the Kyrgyz republic we focus on:
Fostering sustainable growth by strengthening regional cross-border linkages: As a landlocked economy with a limited domestic market, the Kyrgyz Republic would benefit greatly from deeper regional integration, given its important energy export potential, as well as good regional trade and transit position. In that context, the Bank will aim to help facilitate economic and trade cooperation and integration with the region, by supporting rehabilitation of critical infrastructure, strengthening the exporting sector including through access to finance and advisory, as well as supporting cross-border investments and regional cooperation projects.
Enabling SMEs to scale-up and bolster competitiveness: Outside the extractive sector, the economy is dominated by SMEs, with few mid-sized corporates in existence. While deeper regional trade links create opportunities for the best local firms, stronger operating models and core competencies will be needed to better compete. The Bank will thus support competitiveness and sustainable growth of SMEs with viable business models through investment and advisory, promoting in particular skills transfer and operational efficiency improvements, and seek to strengthen the financial sector to facilitate access to finance for SMEs, in particular in local currency. The Bank will also step up its efforts of improving the business environment through policy dialogue.
Promoting sustainability of public utilities through commercialisation and private sector participation: To address underinvestment, deficient regulatory environment, weak core competencies, poor financial and operational performance, the Bank will continue to support municipal utilities, where it has a recognized expertise and delivery model in improving operators’ financial condition, operating practices and governance, and seek to support sustainability of power sector by rehabilitating assets and developing a more attractive institutional framework for private investment.
In addition, the Bank will seek to support through the above priorities the reduction of regional economic disparities, by increasing its outreach to less developed rural areas, in particular in the southern regions, and addressing inclusion gaps in relation to gender and youth across sectors.
The EBRD’s latest Kyrgyz Republic strategy was adopted on 25 February 2015
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EBRD forecast for Kyrgyz Republic Real GDP Growth in 2016 1.0%
EBRD forecast for Kyrgyz Republic Real GDP Growth in 2017 2.6%
Growth in the Kyrgyz Republic is expected to decline significantly to 1.0 per cent in 2016, compared to 3.5 per cent in 2015, reflecting continued external challenges, following major challenges in 2014 and 2015. Remittances from Russia have declined significantly in 2015 (25 per cent year-on-year in US dollar terms, 10 per cent in Som terms); overall exports were down by 12 per cent in 2015 and are expected to remain subdued.
The Som depreciated 22 per cent (against the US dollar) in 2015, despite tight monetary policy and interventions on the currency market by the National Bank of Kyrgyz Republic. Change of the tariff structure enacted as part of the accession to the Eurasian Economic Union (EEU) has negatively affected trade with countries outside of the EEU, whilst potential benefits to Kyrgyz companies from access to the larger (EEU) market are not fully accruing as a result of an insufficient quality of production and a lack of quality standard certification facilities (needed for the certification of exports within the EEU).
Financial support and FDI from Russia and China in particular have helped to counter the effects of the negative external environment, and the role of this support and investment can be expected to remain important in 2016-17. Growth in 2017 can be expected to improve, projected at 2.6 per cent, reflecting an expected gradual improvement in the external environment in 2017; however, a build-up of challenges over 2014-16 will continue to weigh on the outlook on prospects.