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 account for one-tenth of the country's GDP and almost half of 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 (2.1% as per the IMF estimates); however, growth is expected to accelerate in 2022, thanks to a gradual recovery in tourism, transportation, and related services: the IMF forecasts an expansion of 5.6%, followed by 4.6% in 2023.

The budget deficit, which is mainly due to infrastructure financing, is 60% funded by concessional loans and foreign grants. It stood at an estimated 3.3% of GDP in 2021 and is expected to widen over the forecast period (4.7% in 2022 and 4.4% the following year - IMF). After increasing following the outbreak of the COVID-19 pandemic, the debt-to-GDP ratio started following a downward trend since 2021 (67.6%); as activity increases and spending is consolidated it should decrease further this year (63.1%) and the next (61.3%). More than 80% of the external debt is denominated in foreign currency and is held by multilateral (IMF, ADB, World Bank, EFSD) and bilateral lenders as well as by China’s Eximbank (40%). Inflation spiked in 2021 (13%) but is expected to return towards the 5%-7% target set by the central bank (7.8% this year and 6.1% in 2023), thanks to cooler domestic demand and tighter monetary policy. Kyrgyzstan maintains close relations with China, which has helped the country finance infrastructure projects. 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. After the protests that followed the 2020 parliamentary elections, Sadyr Japarov was elected in January 2021 with a huge majority. In April, the parliamentary system was transformed into a presidential one with a constitutional referendum. However, the political situation remains uncertain, especially following the Russian invasion of Ukraine, which will destabilize the whole region.

Kyrgyzstan is one of the poorest countries in the region, but the poverty rate is expected to gradually decline. The Asian Development Bank estimates that 20.1% of the population lives below the poverty line. Income inequality in the country has been declining since 2006, and the Gini index stands at 29.7% (World Bank, latest data available). Unemployment was estimated at 8.7% in 2020 by the World Bank (latest data available).

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: February 2023