2014年-世界发展银行全球_Kyrgyz_Republic___Moderating_Growth_and_a_Challenging_Outlook_32页_4mb

Kyrgyz Republic: Moderating Growth and a Challenging Outlook

Core Content

The Kyrgyz Republic experienced a notable slowdown in economic growth in 2014, with real GDP growth projected at 3 percent for the year, down from the earlier projection of 4 percent. The slowdown was attributed to several factors, including the winding down of the Manas Transit Center operations, geopolitical tensions with neighboring countries, and a poor agricultural harvest. While gold exports remained strong, contributing to a 34.4 percent increase in the first half of the year, non-gold exports declined due to reduced re-export volumes and trade restrictions. Inflation also rose sharply, reaching 8.5 percent in June 2014, driven by the depreciation of the Kyrgyz som and higher imported fuel prices.

The government formed a new administration in April 2014 following the resignation of the previous cabinet, which was due to allegations of budget fund embezzlement. The new government, led by Prime Minister Djoomart Otorbaev, continued most policies but introduced a fresh momentum for reforms in key sectors. The country also agreed on a roadmap for accession to the Eurasian Customs Union, with a $200 million grant and a $1 billion concessional credit facility pledged by Russia.

Main Points

Political Developments

• A new government formed in April 2014, continuing the same coalition of political parties.
• Political tensions are expected to rise as parliamentary elections are scheduled for autumn 2015.
• Border disputes with Tajikistan and trade restrictions with Uzbekistan and Kazakhstan have caused military clashes and disrupted trade flows.
• The government has committed to joining the Eurasian Customs Union, with financial support from Russia.

Economic Developments

• Growth: GDP growth slowed to 3.3 percent year-on-year in January-July 2014, driven by capital-intensive investments and gold exports.
• Inflation: Headline inflation surged to 8.5 percent in June 2014, up from 4 percent in December 2013. Core inflation decreased slightly but remained above the central bank's target.
• Balance of Payments: The current account deficit narrowed to 11 percent of GDP from 15.5 percent, due to lower imports and higher gold exports.
• Employment: Employment and labor force participation declined in 2013, with most new jobs created in the informal sector. Unemployment rates fell as people exited the labor force.
• Poverty: Poverty rates slightly declined in 2013, with the absolute poverty rate at 37 percent and extreme poverty at 2.8 percent. However, the link between growth and poverty reduction weakened due to price shocks and reliance on capital-intensive sectors.

Key Policies

Fiscal Policy

• The fiscal deficit widened to 3.1 percent of GDP in January-July 2014, partly due to increased public investment and reduced tax revenues.
• The 2014 Budget was revised to increase the deficit to 5.7 percent of GDP, driven by faster implementation of foreign-financed projects.
• Tax revenues slightly declined due to slower economic activity, but non-tax revenues increased, supported by donor aid and grants.
• Tax collection improved, with a reduction in the tax gap to around KGS1.1 billion by June 2014.

Monetary and Exchange Rate Policies

• The Kyrgyz som depreciated further in late 2014, despite central bank interventions.
• The real exchange rate appreciated due to insufficient depreciation of the nominal rate.
• The central bank increased reserves to around US$2.2 billion by mid-2014, maintaining import coverage at 4 months.

Structural Reforms

• The government is focusing on improving competitiveness through infrastructure upgrades and legislative changes.
• The economy is expected to grow at 4-4.5 percent annually over the next three years, supported by strong government spending on infrastructure, energy, transport, and mining.
• There is a need for more significant reforms in the agricultural and social sectors to ensure inclusive growth and poverty reduction.

Outlook

• The medium-term growth outlook is challenging due to the slowdown in Russia and reduced re-export activities.
• The growth model has shifted from being pro-poor to less effective, as capital-intensive sectors now contribute more than domestic demand and non-commodity exports.
• Continued investment in infrastructure and energy is expected to support growth, but the economy remains vulnerable to external shocks and weak domestic demand.
• Ensuring inclusive growth and reducing poverty will require changes in growth patterns and improvements in social sectors.

Key Figures and Data

• GDP Growth: Slowed to 3.3 percent in 2014 (Jan–Jul), from 10.5 percent in 2013.
• Inflation: Reached 8.5 percent in June 2014, up from 4 percent in December 2013.
• Current Account Deficit: Narrowed to 11 percent of GDP in 2014 from 15.5 percent.
• Poverty Rate: Declined to 37 percent in 2013 from 38 percent in 2012.
• Unemployment Rate: Fell to 8.3 percent in 2013 due to people exiting the labor force.
• Fiscal Deficit: Increased to 5.7 percent of GDP in 2014, with government borrowing at nearly US$250 million.
• Reserves: Rose to US$2.2 billion by mid-2014.

Challenges

• Geopolitical Tensions: Border disputes and trade restrictions with neighbors are affecting economic stability and growth.
• Fiscal Risks: Increased debt financing and FDI inflows are raising concerns about external debt sustainability.
• Inflation Pressures: Despite some easing in August, inflation is expected to rise above the target of 7 percent due to fuel prices and new tariff policies.
• Poverty and Inequality: The link between growth and poverty reduction has weakened, with urban and rural poverty trends diverging.
• Agricultural Weakness: Poor harvests and low water inflows have negatively impacted the agricultural sector, which remains a major employer and contributor to poverty reduction.

Conclusion

The Kyrgyz Republic is facing a moderating growth trend and a challenging outlook due to external economic and political factors. While the government has taken steps to support economic development through fiscal and structural reforms, the economy remains vulnerable to external shocks and internal inefficiencies. Ensuring inclusive and sustainable growth will require a shift in growth patterns and a focus on improving social sectors and trade relations.