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 2018 2.7%
EBRD forecast for Kyrgyz Republic Real GDP Growth in 2019 3.2%
After strong growth momentum in 2017 (4.6 per cent), the Kyrgyz economy has significantly decelerated in 2018 to 1.2 per cent growth year-on-year in the first three quarters of 2018, as gold production at Kumtor, the largest mine, has contracted. Stronger gains in mining in the fourth quarter of 2018 are expected to help lift GDP growth to 2.8 per cent in 2018 as a whole. While the foreign trade deficit widened due to falling gold exports and a rise in imports, remittance inflows strengthened (8 per cent year-on-year growth in US dollar terms) in the first eight months of 2018. There were some minor fluctuations of the exchange rate, but it has remained broadly stable, which has resulted in effective appreciation against the rouble and the tenge. Credit continued to expand at a high pace in 2018. Inflation nevertheless has been moderating and reached 1.2 per cent in September 2018, significantly below the target band of 5-7 per cent.
The central bank reduced its policy rate from 5.0 per cent in 2017 to 4.75 per cent in May 2018 and has kept it there since. Fiscal consolidation efforts are ongoing, the budget deficit is targeted at 2.5-2.6 per cent of GDP in 2018 and 1.6 per cent of GDP in 2019, lower than the 3.3 per cent of GDP achieved in 2017. GDP growth is expected to reach 3.2 per cent in 2019, marginally higher than in 2018 as non-mineral exports are expected to grow, thanks to further Eurasian Economic Union integration, and as remittances rise further. The main risks to the outlook are a slower-than-assumed recovery in mining and a weaker-than-assumed growth of the Russian economy.