Kyrgyzstan: Economic Outline

Economic Indicators

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Landlocked Kyrgyzstan is a low-middle-income country and one of the poorest in Central Asia. Its economy is heavily dependent on gold exports (which generally account for one-tenth of the country's GDP and almost half of the exports), as well as remittances from citizens working abroad, primarily in Russia (equating to more than one-fourth of GDP), which decreased in recent years due to the deterioration of the Russian economy (a trend that is likely to be exacerbated by the Russia-Ukraine conflict). The cumulative effects of the COVID-19 pandemic and the political tensions that characterized 2020 plunged Kyrgyzstan into its worst recession since 1994, with a decrease of 8.6% of GDP. The economy rebounded only marginally in 2021 (+3.7% as per the IMF estimates); however, the Kyrgyz Republic has shown resilience to the spillovers from the war in Ukraine and is estimated to have grown by 5.5% in 2022, driven by gold production, trade, transportation, and agriculture (IMF). Growth in 2023 is expected to decelerate to 3.5%, as the projected global slowdown and the contraction in Russia start to weigh on the Kyrgyz economy, followed by 3.6% the following year (IMF).

The budget deficit, which is mainly due to infrastructure financing, is 60% funded by concessional loans and foreign grants. In 2022, the general government deficit, which includes lending to state-owned enterprises in the energy sector, was projected to have expanded to 5.2% of GDP from the previous year's 0.8%, mainly because of a substantial rise in public sector salaries and pensions, as well as public investment, which has counteracted efforts to enhance tax administration that resulted in a notable boost of about 6 percentage points in tax revenue as a share of GDP. The debt-to-GDP ratio was estimated at 60.4% in 2022 and should remain stable over the forecast horizon, but elevated fiscal deficits may result in a moderate build-up of public debt in the medium term (IMF). Annual inflation increased to over 15% during the year, mainly due to high global food and fuel prices, but core inflation also rose to double digits and the rate is expected to decline only marginally to about 10% by end-2023. The country has been trying to attract foreign investment to expand its export base, including the construction of hydroelectric dams, but a difficult business climate and disputes with foreign investors hindered the country’s attractiveness. Kyrgyzstan maintains close relations with China, which has helped the country finance infrastructure projects. The main challenge for policymakers is to strengthen macroeconomic stability, rebuild policy space for future shocks, mobilize financing for development needs, and raise growth potential by advancing reforms (IMF).

Kyrgyzstan is one of the poorest countries in the region (the Asian Development Bank estimates that 20.1% of the population lives below the poverty line), but the poverty rate is expected to gradually decline. Income inequality in the country has been decreasing since 2006, and the Gini index stands at 29% (World Bank, latest data available). Unemployment was estimated at 4.8% in 2021 by the World Bank (latest data available). In 2022, the country’s GDP per capita (PPP) was assessed at USD 5,771 by the IMF.

Monetary Indicators	2016	2017	2018	2019	2020
Kyrgyzstani Som (KGS) - Average Annual Exchange Rate For 1 GBP	94.40	88.63	91.84	87.25	99.16

Source: World Bank - Latest available data.

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Latest Update: September 2023