The World Bank is forecasting a slowdown in economic growth this year for the countries of Central Asia, with Kyrgyzstan a cause for particular caution.
The disappointing forecast, published in a new report, stems from the general weakening of the global economy. Additional negative factors cited were the five governments’ tight credit policies, lower commodity prices, and slowing economic growth in China. The World Bank’s Vice President for Europe and Central Asia Antonella Basani commented: “The states of Europe and Central Asia continue to confront multiple crises, exacerbated by unfavorable dynamics of global economic growth. Restoring productivity growth by fostering business dynamism and building resilience to climate change risks can help protect the region’s [local] population and boost economic growth.”
The World Bank’s outlook for Kyrgyzstan’s economy is particularly muted. The bank said in its report: “GDP growth is expected to slow down to 4.5 percent in 2024 as growth in the services sector slows down. On the demand side, consumption growth will slow despite a slight increase in remittance inflows, while investment and net exports are expected to support growth.”
World Bank analysts say that due to the lack of structural reforms in Kyrgyzstan, the the economy’s growth rate will slow down from year to year. However, with a reasonable monetary policy from the National Bank and stable prices for fuels and lubricants, inflation may fall to 5-7% annually. The budget surplus, which the Kyrgyz authorities have boasted about, will turn into a deficit by the end of the year due to a decrease in tax revenues. Furthermore, due to increased expenditures on capital investments, the budget deficit may grow to 2.4% by 2026.
“There are external risks to growth, mainly driven by the geopolitical situation and the state of trade flows with Russia. There could be a marked deterioration in the Russian economy and, due to this, a reduction in remittances and exports. Possible spikes in global food and fuel prices may reverse the downward trend and push inflation to double digits,” the World Bank report says.
At the same time, the negative economic trends can be avoided. To do so, the Kyrgyz government needs to undertake radical reforms to improve governance and reduce corruption. The authorities need to help the private sector develop by removing administrative barriers, World Bank analysts have said.
