2012年-世界发展银行全球_Kyrgyz_Republic___Gold_is_Not_Enough_24页_730kb

Kyrgyz Republic: Gold Is Not Enough

Core Content

The Kyrgyz Republic's economic report for October 2012 highlights the significant challenges the country faces due to its heavy reliance on gold production, particularly from the Kumtor mine, and the broader implications for growth, fiscal policy, and the balance of payments.

Recent Economic Developments

Political Developments

• A new coalition government was formed in September 2012 after the collapse of the previous administration in August.
• The coalition includes three of the five main political parties: Social Democrats, Ar-Namys (Dignity), and Ata-Meken (Fatherland).
• The government continues its commitment to structural reforms, including anti-corruption, public finance management, and improving the business environment.

Economic Growth

• The economy experienced a sharp contraction in the first half of 2012, with real GDP falling by 5.6 percent year-on-year due to a 60 percent decline in gold production at Kumtor.
• Excluding gold, real output grew by 3.9 percent, with positive growth across all sectors, driven mainly by the services sector and non-Kumtor industries.
• The growth in non-gold sectors was resilient, contributing 2.3 and 0.8 percentage points to GDP, respectively.
• Power generation growth declined to 13 percent, down from 20 percent in the same period last year, due to water shortages at the Toktogul reservoir.

Balance of Payments

• A significant decline in gold and electricity exports, combined with rapid import growth, led to a worsening trade balance.
• The trade deficit widened to 33.3 percent of GDP during the first half of 2012 from 24.1 percent in the same period of 2011.
• Imports grew by 35 percent, with fuel imports increasing by 73 percent, contributing to the deterioration of the current account.
• The current account deficit is projected to reach 12 percent of GDP by the end of 2012.
• The country's gross international reserves increased slightly despite the current account deficit, attributed to unrecorded exports.

Inflation and Monetary Policy

• Headline inflation decreased due to lower international food prices, but core inflation remained high at 11.4 percent in the 12 months through June 2012.
• The Central Bank lowered its key policy interest rate to 6.8 percent in June from 13.6 percent in December 2011.
• The real effective exchange rate (REER) depreciated by 5 percent from December 2011 to April 2012 before resuming an appreciating trend.

Fiscal Policy

• The fiscal deficit is projected to reach 6.1 percent of GDP in 2012, the highest in Europe and Central Asia.
• Government expenditures increased by 10 percentage points of GDP from 2008 to 2012, driven by wage increases, social spending, and capital expenditures.
• The government has highlighted the need for fiscal consolidation, targeting current expenditures, but faces political sensitivities due to recent wage increases and social benefits.

Macroeconomic and Fiscal Outlook

Growth Outlook

• The 2012 growth projection was revised down to 0.9 percent from 5 percent expected in April, due to the significant drop in gold production.
• Non-gold growth is projected to increase by 4.5 percent, driven by the services and construction sectors.
• The power sector, which was a major growth driver in 2011, is expected to contribute less in 2012 due to the unusually high growth in 2011.

Fiscal Consolidation

• Fiscal consolidation remains a key policy challenge, with the need to reduce current expenditures and manage rising pension payments.
• The government aims to keep spending on goods and services and capital expenditures at the same level as last year, while reducing transfers and subsidies.

Debt Sustainability

• Moderate risks remain for debt sustainability, with the present value of public debt to GDP ratio projected to rise to more than 40 percent under extreme fiscal and growth shocks.
• The country's external borrowing is the main source of financing for the current account deficit, with public and private sector borrowing reaching $155.4 million in the first quarter of 2012, up 82 percent from the same period in 2011.

Key Information and Figures

• Gold Production: Kumtor mine's production dropped to 125 thousand troy ounces in the first half of 2012 from 336 thousand troy ounces a year earlier.
• Poverty: Poverty increased by 2 percentage points to 36.8 percent in 2010, but fell to 4.5 percent in 2011. Urban poverty rose by 7.1 percentage points to 30.7 percent, while rural poverty increased by only 0.9 percentage points to 40.4 percent.
• Unemployment: Unemployment rates among low-skilled workers in urban areas are four times higher than in rural areas due to the higher level of informality in rural labor markets.
• Exchange Rates: The real effective exchange rate (REER) depreciated by 5 percent from December 2011 to April 2012, before resuming an appreciating trend.
• Fiscal Deficit: The fiscal deficit is projected to be 6.1 percent of GDP in 2012, with tax revenues expected to increase slightly due to a $20 million tax advance from Kumtor and strong import revenue growth.

Conclusion

The Kyrgyz Republic's economy is highly dependent on gold production, which has been a significant driver of growth. However, the volatility in gold production has led to economic contractions, a worsening trade balance, and a large fiscal deficit. While non-gold sectors showed some resilience, they remain vulnerable to external shocks and require substantial investment and regulatory improvements. The government's commitment to structural reforms and fiscal consolidation is crucial for long-term stability and growth.