Kyrgyzstan’s economic growth in 2017 exceeds the IMF forecast

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BISHKEK (TCA) — Kyrgyzstan’s gross domestic product in 2017 was 493 billion soms and increased by 4.5% compared to 2016, the National Statistical Committee of Kyrgyzstan said.

The GDP growth was higher than the forecasts of the government and international financial institutions including the International Monetary Fund and the World Bank.
At the end of 2016, the IMF and WB expected growth of no more than 3.5%. According to the conclusion of the IMF mission in November 2017, the country’s GDP was expected at 3.2%. The forecast for Kyrgyzstan’s economic growth was lowered by 0.3% due to the situation on the Kyrgyz-Kazakh border.

Kyrgyzstan’s industrial output amounted to 231 billion soms last year and increased by 11.5% compared to 2016. The industry grew due to the growth of extraction of metal ores and crude oil, as well as production of plastic and food products including beverages and tobacco products.

Dependence on Kumtor

In early 2017, the GDP growth was very impressive — more than 7%. However, the year ended with an increase of 4.5% due to the impact of the operation of the Kumtor gold mine. The economy is still dependent on gold mining, while investors are not in a hurry to enter Kyrgyzstan.

Dependence on one enterprise represents a significant risk to the economy. In 2018, the gold production will decrease at Kumtor, so it is likely that the current GDP may also change, experts say.

One of the main events of 2017 was the signing of a new agreement on Kumtor between the government of Kyrgyzstan and Centerra Gold. In December 2017, it was 20 years since the development of the Kumtor mine started in the country. Over the years, several unsuccessful attempts have been made to conclude an agreement beneficial to the Kyrgyz side.

Finally, in September 2017, the Kyrgyz government and Centerra signed a new agreement under which the Canadian company will allocate $50 million to the newly established Environmental Development Fund to finance environmental protection measures. The money will primarily be used for the modernization and construction of new modern treatment facilities in the water area of Lake Issyk-Kul. In addition, the annual environmental payment was increased to $3 million.

The new agreement on Kumtor became a signal to foreign investors that they can enter the country.

Industrial growth and trade

The industrial growth indicators are encouraging. Earlier, mainly services and trade were developing, and the population received revenues from re-export. Currently, the country’s economy is aimed at industrial production.

Among the countries of the Eurasian Economic Union, the largest growth in industrial production in the ten months of 2017 was recorded in Kyrgyzstan — 13.7%, the Eurasian Economic Commission announced in December 2017.

For 11 months of 2017, Kyrgyzstan’s foreign trade amounted to $6 billion, 11% more compared to 2016. Exports increased by 12.8% and imports by 10.2%.

The exports grew due to the increased exports of glass, butter, precious metals, non-monetary gold, and dried fruits. The country increased imports of fabrics, ceramic products, tires for vehicles, medicines, and petroleum products.

The trade between the Eurasian Economic Union member countries amounted to $2.1 billion (14.3% growth). The main trade partners were Russia (59% of the total) and Kazakhstan (36.6%).

2017 was a breakthrough year in the trade between Kyrgyzstan and Uzbekistan. For the first time in the years of independence, bilateral trade exceeded $250 million. Due to the 1.7-fold increase in trade last year, Uzbekistan entered the top five countries that are trading partners of Kyrgyzstan. In the coming years, Uzbekistan plans to increase the trade with Kyrgyzstan up to $500 million.

The main trading partners of Kyrgyzstan were China ($1.324 billion, the share in Kyrgyzstan’s foreign trade was 26.9%), Russia ($1.088 billion, 22.1%), Kazakhstan ($743 million, 15.1% ), Switzerland ($490 million, 9.9%), Uzbekistan ($257 million, 5.2%), Turkey ($252 million, 5.1%), the United States ($135 million, 2.7%), Germany ($56 million, 1.1%), Belarus ($40 million, 0.8%), and South Korea ($39 million, 0.8%).

Inflation

For 11 months of 2017, inflation in Kyrgyzstan’s consumer sector was 3.7%.

In 2017, prices for tobacco products increased significantly, by 24.1% and for services by 6.9% compared to 2016.

Prices for non-food products increased by 3.2%, food products and non-alcoholic beverages by 2.7%. The maximum increase in prices by 11.1% was fixed in the Osh province in the south of the country and the smallest increase was in Bishkek (2.3%).

Remittances

According to the National Bank, for 11 months of 2017 Kyrgyz labor migrants transferred $2.28 billion to Kyrgyzstan ($1.87 billion for the same period in 2016).

In November, remittances amounted to $205.2 million, which is $30.8 million more compared to the same period in 2016. The largest amount of remittances ($262 million) was recorded in August. More than 90% of the money came from Russia.

Construction

In 2017, the gross output of construction in Kyrgyzstan amounted to 140.2 billion soms, 7.1% more compared to 2016, the National Statistical Committee reports.

Investment in fixed assets grew in the construction of mining facilities, processing industries, supply of electricity, gas, steam and air conditioning, wholesale and retail trade, hotels and restaurants, information and communication, healthcare, entertainment and recreation, as well as housing construction.

The most investments (about 72% of the total) were directed to the construction of facilities for the mineral extraction, supply of electricity and gas, transportation activities and housing construction.

Public debt

As of November 30, 2017, the amount of public debt (external and internal) of Kyrgyzstan was $4.44 billion (309.9 billion soms), the Finance Ministry said. Of these, $4.15 billion was the state’s external debt and $429.46 million — the state’s domestic debt.

At a Parliament meeting on January 11, MP Ruslan Kazakbaev drew the government’s attention to the size of Kyrgyzstan’s public debt, stressing upon the issue of its management.

During the transition to market relations, it was necessary to attract donor assistance aimed at supporting the state budget. More than $2.6 billion, or 28% of the total amount of assistance attracted, was directed to that purpose, he said. Kyrgyzstan has achieved certain results through assistance from international organizations in social development, creation of market infrastructure, improvement of public administration, and reconstruction of highways. However, it is necessary to implement large projects that could bring real incomes to the country’s budget, the MP believes.

Kyrgyzstan’s foreign debt is growing, but the state inefficiently manages it. In particular, there is no comprehensive in-depth analysis of the effectiveness of targeted use of the funds received, as well as control over their use. Over the past four years, the national debt has grown by $797 million and by $379.3 million for 11 months of 2017 alone, Kazakbaev said, adding that the Government should take measures for the effective management of the public debt.