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 2015 5.0%
EBRD forecast for Kyrgyz Republic Real GDP Growth in 2016 3.9%
GDP growth in the Kyrgyz Republic jumped in the first half of 2015 to 7.3 per cent,
around double the 3.6 per cent rate recorded in 2014. The increase in growth came despite the significant downward pressure coming from sharply lower remittances from Russia and the more difficult export environment due to recession in Russia, depreciation of the Russian rouble and sharply slower growth in Kazakhstan. The increase was mainly driven by robust performance in gold production and the base effect from back-loaded production in the previous year. It was also supported by investment and financial assistance provided by Russia as part of the accession to the EEU. Sharply lower oil prices are also providing a boost to consumption and growth, since the country is a significant net oil/petroleum importer. GDP growth for the full year is expected to reach 5.0 per cent. The som has depreciated significantly in 2014 and 2015, notwithstanding the National Bank’s heavy interventions and gradual tightening of monetary policy; however, international reserves have declined to US$ 1.8 billion as of end-September 2015, covering around three months of imports. Inflation is expected to remain elevated at around 8.5 per cent in 2015 reflecting the exchange rate pass through. In 2016, growth is expected to decline to 3.9 per cent, reflecting the continued challenging external environment. Macro vulnerabilities, including from increasing NPLs, and fiscal and social pressures can be expected to increase, reflecting the legacy from lower remittances and returning migrants in 2015 and softer exports to Russia and Kazakhstan. The investment and financial assistance provided by Russia can be expected to remain an important factor affecting growth.