Kyrgyz Republic overview

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Urban scene

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 2020 -4.0%

EBRD forecast for Kyrgyz Republic Real GDP Growth in 2021 5.5%

GDP growth in the Kyrgyz Republic accelerated to 4.5 per cent in 2019 from 3.8 per cent in 2018, supported by a strong recovery in gold production. Remittances decreased by 14 per cent year-on-year in US dollar terms in 2019, but their share in GDP remains high at 28 per cent. With travel restrictions in place and bleaker economic prospects in Russia, the Kyrgyz Republic faces a significant reduction in remittances.

Strict lockdown measures, introduced in late-March, are expected to last until mid-May 2020, further weighing on domestic demand. In addition, the border with China was closed since early February and only partially reopened, resulting in declining imports from China, which will hit domestic production relying on China-made inputs and weigh on re-exports. Facing balance of payment pressures, the Kyrgyz Republic has seen its currency depreciating by 13 per cent between February and April 2020, after 3 years of relatively stable exchange rates. Given low international reserves (2.5 months of current account payments), limited fiscal space and a significant debt overhang, the Kyrgyz Republic was the first country to receive emergency assistance from the International Monetary Fund (IMF; US$ 120.9 million). In the first quarter of 2020, economic growth was still positive, at 1.5 per cent year-on-year, thanks to robust performance in the mining industry. However, a contraction of 4.0 per cent is expected in 2020, due to subdued domestic demand and losses in the SME sector, which accounts for 41.5 per cent of GDP. In 2021, the economy is forecast to achieve a 5.5 per cent GDP growth as remittances partially recover, reexports pick up and gold exports increase due to additional production from the Jerooy gold mine.
 

Kyrgyz Republic in the EBRD’s 2019-20 Transition Report

 
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