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.
EBRD forecast for Kyrgyz Republic Real GDP Growth in 2023 7.0%
EBRD forecast for Kyrgyz Republic Real GDP Growth in 2024 7.2%
The Kyrgyz economy expanded by 7.0 per cent in 2022 despite a major drop in gold exports. An uptick in Russia’s demand for migrant workers, the massive relocation of Russian capital and highly qualified labour to the Kyrgyz Republic and a major increase in intermediated trade more than compensated for the war’s adverse effects. Growth continued in the first quarter of 2023, with strong external and domestic demand leading to gains in industrial production (7.6 per cent year- on-year), hospitality (24.1 per cent), retail and wholesale trade (11.8 per cent) and trucking (18.7 per cent). Imports rose by 27.2 per cent year-on-year in January-February 2023 on the back of higher prices of food and energy, as well as an increase in re-exporting activities. Of special note is the doubling in the importation of trucks in the first two months of 2023, reflecting the country’s outsized role in transit and intermediated trade. Overall, real GDP grew by 4.6 per cent year-on-year in the first quarter of 2023 despite a 34 per cent decline in net remittances. After peaking at 15.6 per cent in July 2022, inflation moderated to 12.7 per cent in March 2023. In 2022, the general government deficit reached 1.3 per cent of GDP (up from 0.8 per cent of GDP in 2021). Ongoing tax administration and tariff reforms will help keep the deficit in check over the medium term. The Kyrgyz economy is projected to grow at 7.0 per cent in 2023 and 7.2 per cent in 2024. In the short term, the economy will continue to gain from expanded re-export opportunities, elevated remittances from Russia and relocation of Russian companies and individuals, including IT developers and entrepreneurs. Investment in major energy and infrastructure projects, such as Kambar-Ata I hydro power plant and the China-Kyrgyzstan- Uzbekistan railway are likely to contribute to growth in the medium term. Nevertheless, vulnerabilities related to tightening credit conditions and reliance on remittances from Russia remain.