Inflation - The Times Of Central Asia

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Economic Growth

Why Strong Economic Growth in Central Asia Masks Underlying Risks

Central Asian countries are significantly outperforming the global average in GDP growth, largely due to differing economic models across the region. However, rapid expansion does not remove deep structural vulnerabilities. As early as March, data showed that the combined economies of Central Asian countries grew by nearly 7% in 2025 compared to the previous year. The World Bank estimates regional growth at 6.2%, while the Eurasian Development Bank (EDB) places it at 6.6%. These calculations include Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan; Turkmenistan is excluded due to limited statistical transparency. By comparison, growth rates in advanced economies are much lower. The EDB expects around 1.6% growth in the U.S. and approximately 1.1% in the eurozone in 2026, while China’s economy is projected to expand by about 4.6%. Nevertheless, experts note that the region’s economic outlook remains complicated by high inflation, income inequality, and continued dependence on external factors. Investment activity and domestic demand have been the key drivers of growth, according to the EDB. Kazakhstan recorded its highest growth in 13 years (6.5%), with industry leading the expansion: mining grew by 9.4% and manufacturing by 6.4%. In 2026, the non-resource sector is expected to play a greater role. Kyrgyzstan has led the region in GDP growth for the third consecutive year: GDP grew by 11.1% in 2025 and by 9% in January 2026. In Uzbekistan, GDP increased by 7.7% in 2025 (up from 6.7% a year earlier), supported by investment, trade, services, and construction. Tajikistan’s GDP rose by 8.4% in 2025, matching the previous year’s performance. Growth continues to be driven by expanding industrial production and strong domestic demand. Early 2026 data suggest this momentum is holding. Uzbekistan’s Record In April, the World Bank highlighted Uzbekistan’s resilience to external challenges and strong growth dynamics. According to its updated report, the country’s 2025 GDP growth was revised upward by 1.5 percentage points to 7.7%. The outlook is 6.4% for 2026 and 6.7% for 2027. Key drivers include high global gold prices, investment inflows, expanded lending, and ongoing structural reforms. Rising household incomes have also played an important role, supported by remittances, which increased by 37% last year to reach $18.9 billion. By the end of 2025, Uzbekistan ranked among the fastest-growing economies in developing countries in Europe and Central Asia, alongside Kyrgyzstan and Tajikistan. The region as a whole is experiencing its highest growth rates in 14 years. At the same time, analysts point to persistent structural constraints, including a large public sector and the dominance of state-owned enterprises, which hinder private sector development. External risks, including geopolitical instability and potential disruptions in energy and fertilizer supplies, remain significant. In 2025, Uzbekistan’s GDP exceeded €133 billion, compared to approximately €56 billion nine years earlier. Over the same period, GDP per capita rose from about €1,750 to around €3,220, nearly doubling average income levels. Investment in fixed capital increased by more than 15% year-on-year in 2025, while export value grew by over 33%. Persistently high global gold prices played a major role: export...

Economy

IMF Warns of Risks for Rapidly Growing Kyrgyz Economy

Kyrgyzstan continues to record strong economic growth and rising per capita income. At the same time, elevated inflation above the National Bank’s 5%-7% target range, rapid credit expansion, strong wage growth, and high liquidity point to signs of economic overheating, requiring timely macroeconomic policy adjustments. These are the key points of an International Monetary Fund (IMF) statement following consultations with Kyrgyz authorities in Bishkek between March 18 and April 1. The IMF noted that after recording fiscal surpluses between 2023 and 2025, the overall fiscal balance is projected to shift into deficit in 2026, reflecting higher public-sector wages and increased capital spending. The mission also emphasized that monetary policy should remain focused on bringing inflation back within the National Bank’s target range. Strengthening the central bank’s independence and governance remains critical to safeguarding price stability. Repeated transfers of National Bank profits to the state budget, while capital remains below statutory thresholds, risk undermining institutional credibility and the effectiveness of monetary policy. The IMF urged the authorities to uphold the provisions of the constitutional law governing the National Bank and to suspend regular profit transfers until capital is adequately restored. According to the IMF, Kyrgyzstan’s banking sector is stable, well capitalized, and liquid. However, nonperforming loans remain elevated, and rapid credit growth could increase vulnerabilities if macroeconomic conditions deteriorate. The mission stressed that structural reforms remain essential to support sustainable and inclusive growth. These should focus on strengthening governance, reducing the state’s role in the economy, and fostering private-sector-led development. Key priorities include reforming state-owned enterprises, improving the business environment and competition, strengthening the rule of law and anti-corruption efforts, and addressing informality and labor market rigidities. According to the National Statistical Committee, Kyrgyzstan’s gross domestic product (GDP) grew by 11.1% in 2025, while inflation reached 9.4%. The government aims to sustain economic growth under the National Development Program through 2030, targeting average annual GDP growth of 8%, total GDP of at least $30 billion, and GDP per capita of $4,500. The Asian Development Bank (ADB) also forecasts continued strong growth, projecting GDP expansion of 8.9% in 2026 and 8.4% in 2027, following 11.1% growth in 2025. Growth is expected to moderate as construction and trade normalize, although domestic demand will remain the main driver, supported by resilient remittance inflows and sustained investment under the National Development Program. ADB projects inflation to rise to 10.3% in 2026 before easing to 8.5% in 2027, driven by strong domestic demand and planned increases in electricity and heating tariffs. Concerns about overheating are not new. A July 2025 meeting at the Kyrgyz Ministry of Economy and Commerce highlighted structural imbalances, including a widening gap between income growth and labor productivity, rising inflation, labor shortages, increased public spending, and rapid growth in consumer lending. Economist Azamat Akeneev told 24.kg that sustainable growth is not possible without improvements in labor productivity and exports. “If the economy grows through consumption and government spending rather than competitiveness and expansion into foreign markets, sooner or later an adjustment phase...

Household spending

Food Spending Remains High in Kazakhstan Households

A high share of household spending on food remains a key indicator of living standards in Kazakhstan, according to analysts at Finprom.kz. By the end of 2025, average annual spending on food and non-alcoholic beverages reached $1,292 per person, up 13.9% year-on-year and nearly six times higher than in 2010. At the same time, the structure of spending has remained largely unchanged. In 2025, food accounted for 47.8% of total expenditures, only slightly below the pre-pandemic level of 50.4%. As a share of income, food expenditures rose to 42.5%, compared to 40.7% a year earlier, suggesting that income growth is being largely offset by inflation. Consumption patterns also remain relatively rigid. Meat and meat products account for 34.4% of food spending, approximately $444 per person, with prices in this category rising by 18.1% over the year. Bread and cereal products (14.7%) and dairy products (10.6%) also make up a significant share. Combined, these categories account for about 60% of total food expenditures. Spending on fruit and vegetables is increasing in absolute terms by 15.3% and 22.8%, respectively, but their shares remain relatively low at 9.1% and 7.7%, pointing to limited diversification in consumption. Fish and seafood account for 4.4% of spending, and eggs for 2.1%, further reflecting a concentration on staple foods. According to analysts, inflation remains the main driver of rising expenditures. In February 2026, prices for food and non-alcoholic beverages increased by 12.6% year-on-year, compared to 6.3% a year earlier. This level is close to the highest rates recorded over the past decade, with the exception of February 2023, when growth reached 26.4%. Analysts warn that if current inflation trends persist, the share of spending on food in 2026 could again exceed 50%, limiting households’ ability to spend on non-food goods and services and placing additional pressure on living standards.

household income

Kazakhstan Targets Growth in Real Household Income

The government of Kazakhstan plans to increase real household income by 2–3% by 2029, according to the Ministry of National Economy. The program includes measures to stimulate employment, raise wages, support entrepreneurship, and create sustainable jobs. Key priorities include increasing wages for public utility workers, civil servants, and agricultural workers; expanding the share of wages in GDP; creating jobs in the manufacturing sector; supporting export-oriented enterprises; and reducing the financial burden on households. The ministry said 2026 will be a pivotal year for establishing sustainable income growth. A joint plan by the government, the National Bank, and the Agency for Regulation and Development of the Financial Market aims to reduce inflation to 9-11% in 2026, 5.5-7.5% in 2027, and 5-7% in 2028. Authorities expect that slowing inflation will increase the purchasing power of incomes. Inflation has already declined from 12.9% in September 2025 to 11% in March 2026. From April 1, tariff policy will be implemented more cautiously. The ministry estimates that tariff increases will add no more than 0.35 percentage points to inflation. At the same time, electricity and transportation tariffs for producers of socially significant goods are set to be reduced by up to 70%. The government also plans to limit the growth of budget expenditures, with their share of GDP expected to decline to 15.1% in 2026. Reductions in transfers from the National Fund will continue, and for the first time in five years, the budget is expected to be executed without targeted transfers. In 2025, targeted transfers from the fund amounted to approximately $6.9 billion, while the guaranteed transfer for 2026 has been set at $5.8 billion. According to the National Statistics Bureau, nominal household income grew by 10.2% in 2025, while real income declined by 1.1%. Average per capita income stood at approximately $506. The ministry noted that the decline in real incomes indicates that economic growth is not sufficiently translating into improved living standards, underscoring the need for additional measures to create jobs and raise wages. The Times of Central Asia previously reported that Prime Minister Olzhas Bektenov called for increasing the share of wages in GDP to 40%.

import duties

Kyrgyzstan Urges EAEU to Remove Import Duties on Key Goods

Kyrgyzstan has appealed to its partners in the Eurasian Economic Union (EAEU) to eliminate import duties on a range of socially significant goods, arguing that the measure would help ease the impact of global inflation and slow domestic price growth, according to an official government statement. The proposal was presented during a meeting of the Eurasian Economic Commission (EEC) held in Moscow on March 13. Kyrgyz officials stressed that the country’s economic conditions differ markedly from those of the bloc’s larger member states, making more flexible trade mechanisms necessary. The initiative covers goods considered critical for food security, including flour, vegetable oil, fruits and vegetables, as well as cocoa powder used in the confectionery industry. Authorities in Bishkek believe that removing import duties on these items would lower procurement costs and reduce the transmission of global price increases to the domestic market. “We are seeing rising inflation worldwide, including for the goods we import, particularly agricultural products. In effect, when we import goods at higher prices, we are also importing inflation. Eliminating duties will help reduce the cost of these products,” said Elimbek Kanybek uulu, head of the EAEU Coordination Department, at a press conference in Bishkek. The full list of goods eligible for preferential treatment, along with import volume thresholds, is expected to be published within a month after the EEC formally approves the decision. According to Kanybek uulu, Kyrgyzstan has previously sought similar temporary measures for meat imports. At that time, the suspension of duties contributed to a reduction of around 10% in the price of imported meat. Food security remains a major policy priority. President Sadyr Japarov has said that Kyrgyzstan is currently self-sufficient in six of the nine staple food items included in the national food basket. The government plans to gradually expand domestic production of the remaining products, including flour, vegetable oil, and certain types of fruit. Analysts say future food price dynamics in Kyrgyzstan will depend on both global commodity trends and decisions within the EAEU regarding trade preferences and tariff policy.

Agriculture

Kazakhstan Considers Supporting Dairy Sector to Curb Inflation

Kazakhstan’s government is considering additional support for dairy processors and bakeries as part of broader efforts to slow inflation and stabilize prices for essential food products. The proposal was discussed during a government meeting focused on inflation dynamics and price trends for socially significant food products. According to Aizhan Bizhanova, Kazakhstan’s First Vice Minister of Trade and Integration, inflation in the country has been slowing for five consecutive months, declining from 12.9% in September 2025 to 11.7% in February 2026. Food inflation has also continued to ease, falling from 13.5% in December and 12.9% in January to 12.7% in February. The ministry attributes the slowdown in part to the expansion of the list of socially significant food products subject to price regulation. The list has been expanded from 19 to 31 items, and since the beginning of the year authorities have opened more than 800 administrative cases related to violations of pricing rules. “During the first week of March, the price index for socially significant food products increased by 0.1%. At the same time, dairy products recorded price growth, mainly due to rising costs of raw milk,” the government’s press service said in a statement. Additional pressure on prices has also come from higher energy costs and increased production expenses. Dairy products account for a significant share of Kazakhstan’s food inflation, estimated at about 6.3%. The Ministry of Trade and Integration therefore proposed exploring mechanisms to support dairy processing enterprises in order to reduce production costs and stabilize prices. The government also discussed possible support measures for Kazakhstan’s bakery sector. Among the options considered were providing bakeries with discounted grain and flour and exploring the possibility of lowering railway tariffs for transporting raw materials. Officials suggested working with the national railway operator Kazakhstan Temir Zholy to reduce transportation costs for the sector. Participants at the meeting noted that prices traditionally rise in March due to seasonal factors. However, the Ministry of Trade and Integration plans to mitigate the impact through additional price discount campaigns and expanded agricultural fairs. Kazakhstan also continues to use a “green corridor” mechanism to facilitate the import of vegetables from neighboring countries. Deputy Prime Minister and Minister of National Economy Serik Zhumangarin, who chaired the meeting, instructed authorities to conduct a detailed review of pricing at 42 dairy processing enterprises operating in Kazakhstan. The aim is to identify effective mechanisms for supporting producers and stabilizing consumer prices. Officials also highlighted slow releases of vegetables from regional stabilization funds, which supply products to the market at fixed prices. The slow pace was particularly noted in the Aktobe, Zhambyl, Kyzylorda, and Ulytau regions. Zhumangarin instructed the Ministries of Agriculture and Trade to inspect regional stabilization funds and verify the actual availability of products reported by local authorities. Despite recent improvements, several international organizations expect inflation in Kazakhstan to remain elevated in 2026. S&P Global Ratings forecasts inflation will reach about 11% by the end of the year. The Eurasian Development Bank predicts inflation could fall to 9.7% by...