Where is the Origin of the Leap in the Kyrgyz Economy?
July 12, 2024
Kubatbek Aybashov

The National Statistics Committee announced that the economy of Kyrgyzstan grew by 8.1% in the last six months, with the largest growth in the construction and trade sectors. However, industrial growth significantly slowed down. What were the reasons behind these figures?

In June 2024, the economy of Kyrgyzstan reached 560 billion soms, an increase of 8.1%. Including the share of the "Kumtor" mine, the growth was 9.9%. The Kyrgyz government hailed this as a success, calling it the highest achievement in recent years. The GDP growth was attributed to taxes on goods production, the service industries, and products.

Nazira Kerimalieva, the first deputy chairman of the National Statistics Committee, highlighted at a press conference on July 10:

"In January-June 2024, the gross domestic product, according to preliminary estimates, was about 560 billion soms, an 8.1% increase compared to the corresponding period last year. This growth was driven by the increase in goods production, the service sector, and taxes on products. The largest share in GDP structure was from service industries, comprising nearly 52%. Industry accounted for 17%, agriculture 6%, and construction close to 6%.

The construction sector saw the largest increase, growing by 48.5% compared to the previous half year. Wholesale and retail trade grew by 21%, agriculture by 3.3%. Industrial production has been slowing since January, with a 1% increase in June.

Consumer prices and tariffs rose by an average of 2.4%. Prices for alcohol and tobacco increased by 6.1%, non-food products by 1.8%, food products by 1.5%, and public service tariffs by 3.6%.

Chairman of the Cabinet of Ministers, Akylbek Japarov, attributed economic growth to macroeconomic stability, fiscal order, monetary and credit policy, and economic reforms. He emphasized the fight against corruption and illegal financial flows, deployment of new technologies to improve public finance and asset management, and support mechanisms for small and medium-sized enterprises. He stressed the importance of maintaining fiscal order, and ensuring transparency and efficiency of the budget.

The National Statistics Committee reported a GDP growth of 6.2% in 2023. Akylbek Japarov stated that economic growth should not be less than 10 percent annually, aiming to bring GDP to 30 billion dollars by 2030.

Economic analyst Iskender Sharsheev cited several factors affecting economic growth, noting the burden of high prices on the population:

"The main growth is in export, re-export, light industry, and production sectors. A small increase is seen in construction. Government spending, especially on construction and infrastructural projects financed from the budget, national reserves, and investor money, is a key driver. Global inflation, devaluation, price rise, and increase in M2 money supply also influence current economic growth indicators. Despite the booming economy, rising inflation impacts the cost of living, making it difficult for the populace."

Some analysts see the high performance of the Kyrgyz economy from a different perspective.

The Eurasian Stabilization and Development Fund, in its quarterly report on July 9, stated that the Russian factor significantly impacted Kyrgyzstan's economic development. Sergei Ulatov, the chief economist, mentioned that about 3% of the growth is due to labor and capital flow from Russia and competitive import-related economic changes. He noted that Kyrgyzstan's national statistics might not fully reflect the reality, predicting 4.8% economic growth in 2024 and 4% in 2026.

The World Bank, in its June report, predicted a slower growth for Kyrgyzstan in 2024, at 4.5%, with a downward trend in the following years.

The report cited several conditions hindering economic development in Central Asia:

"Geopolitical issues related to Russia's invasion of Ukraine, potential conflict continuation, and regional political chaos create a bleak future. Increased trade restrictions and declining exports further slow economic growth. Additionally, adverse weather phenomena negatively impact development. Inflation has recently slowed, but Middle Eastern conflicts could raise energy prices. Higher-than-expected wage increases will add to inflationary pressure."

If the Kyrgyz government implements the Kambar-Ata hydropower stations and the China-Kyrgyzstan-Uzbekistan railway project, it is hoped that economic development will accelerate by at least 10 percent. Furthermore, developing the Kyzyl-Ompol titanium magnetite mine, which contains uranium, promises a new era of growth for Kyrgyzstan.
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