שוויץ
רוסיה (הפדרציה הרוסית)
קזחסטן
אוזבקיסטן
איחוד האמירויות הערביות
סין
אירופה
דרום קוריאהNormalising growth
Economic growth is expected to slow in 2024 and even more so in 2025, before finally returning to its long-term level which has been undermined by chronic poor governance as a direct consequence of the faltering services sector (57.6% of GDP in 2022), particularly in transport and trade. After a pause in 2022 to consolidate the reserves of the National Bank of Kyrgyzstan (BNK), gold exports (up to 42.9% of exports and 15.3% of GDP in 2021) have been gradually picking up since 2023, once again helping to sustain growth. At the same time, the government intends to pursue its protectionist and nationalist economic policy, while corruption, organised crime and an execrable business environment continue to deter many foreign companies. All the more so as the authorities are endeavouring to drive private investors out of the mining sector by raising operational barriers in favour of powerful state-owned enterprises, such as Kumtor, the country's largest gold mine that was nationalised in 2022 after a dispute with the Canadian company that operated it until then. A number of flagship regional infrastructure projects driven by robust fixed capital investment spending (22.3% of GDP in 2023) and international cooperation will also support the construction sector and growth in the years ahead, such as the China-Kyrgyzstan-Uzbekistan railway project, signed in June 2024, and the resumption of work in February of the same year on CASA-1000, a project that will eventually enable the country to export its surplus hydroelectric output to South Asia. Durably high inflation, although falling and contained within the BNK's target range (5-7%), should hold back growth in household consumption (74.7% of GDP in 2023) in 2024 and 2025, despite transfers from expatriate workers which are still high (18.6% of GDP in 2023) but lower than in previous years (up to 32.6% of GDP in 2021). The BNK therefore intends to continue its monetary easing – it lowered its main key rate from 14% in November 2022 to 9% in May 2024 – even if, in reality, its impact on the real economy remains very modest, given the significant dollarisation of the Kyrgyz financial sector (almost 50% of loans and around 20% of deposits), which is still largely underdeveloped.
Nationalisations weigh on public finances, gold and remittances from the diaspora ease the current account deficit
After an exceptional surplus in 2023, due to better mobilisation of tax revenues and substantial profits from state-owned companies, public finances are expected to return to deficit from 2024 and even more so in 2025. This deterioration is due to lower growth in tax and non-tax revenues because of the slowdown in growth, while the government intends to maintain its generous social policy, with social benefits representing 10.4% of GDP in 2024, and net acquisitions of non-financial assets, i.e., essentially the nationalisation of companies (banks, telecoms, etc.), will remain high (8.1% of GDP in 2023). Leaving aside this last type of specific expenditure, the state budget would in fact be in substantial surplus, amounting to 8.2% of GDP in 2023, for example. The fact remains that the public deficit will be financed largely by domestic borrowing, leading to a de facto reduction in the proportion of external debt over the entire period. However, the proportion of public debt in GDP – 79.1% still held by foreigners in 2023 (mainly China and a few multilateral organisations) – will continue to fall because of economic growth.
Although showing a marked improvement compared with 2022 or 2023, the current account will still be in deficit in 2024, with an extension of the trend in 2025, although this will mark a gradual return to normal as gold exports and remittances from the diaspora, the two main determinants of the external accounts, return to normal levels. Looking in closer detail, the massive structural deficit in the trade balance (-58.5% of GDP in 2022) should improve under the combined effects of the recovery in gold exports, the slowdown in the growth of commodity imports due to lower prices and the growth in service exports thanks to the return of tourism. At the same time, remittances from expatriate workers are expected to rebound from their low point in 2023 to increasingly offset – albeit still partially – the imbalance in the balance of goods and services. This upturn can doubtless be explained by the more discreet presence of Tajiks in Russia since the Crocus City Hall bombing, perpetrated by their compatriots, despite the continuing high demand for immigrant labour, which benefits Kyrgyz emigrants to a greater extent.
However, there are still many uncertainties surrounding the record deficits recorded in recent years given the disproportionate size of the item reporting errors and omissions (up to 84.9% of the deficit in 2022), which the IMF suspects is due to the non-recording of re-exports to Russia (estimated at 30% of GDP in 2022), the inclusion of which would significantly reduce the current account deficit. This practice should gradually disappear as re-exports are more reliably recorded in official data. This partly explains the reduction in the deficit over the period, which, errors and omissions aside, will be financed by FDI (3.8% of GDP in 2023) and external borrowing.
Kyrgyz democracy in danger
Long lauded as a model of democracy in the region, despite recurrent revolutionary episodes in 2005, 2010 and 2020 due to low living standards, poor governance and regional divisions, Kyrgyzstan is gradually gaining ground as an increasingly authoritarian regime, following in the footsteps of other countries of the former USSR. In 2020, major demonstrations led to the cancellation of parliamentary elections and the resignation of President Sooronbay Jeenbekov. The new president, Sadyr Japarov, was elected in January 2021 after a free but flawed campaign (in terms of financial resources and media coverage of the 17 candidates). He consolidated his position by winning an absolute majority in the parliamentary elections in November 2021. At the same time, he changed the Constitution to strengthen his powers at the expense of those of Parliament. Since then, Japarov has endeavoured to increase his relative control over Kyrgyz politics, for example by pushing through a restrictive bill in April 2024 on foreign agents that was modelled on Russian legislation, at the risk of stirring up public discontent. The next presidential and parliamentary elections are scheduled for 2026 and 2027 respectively, in which Sadyr Japarov will be eligible for re-election since the new Constitution now allows him to hold power for two five-year terms, instead of the six-year term previously. However, he is by no means immune to renewed dissent, which could force him to resign prematurely in a political context that remains highly unstable.
Internationally, Kyrgyzstan enjoys good relations with Russia and China, two major partners which provide a large proportion of the country's funding, investment and defence. Kyrgyzstan also belongs to two military and economic alliances under the aegis of Moscow: the Eurasian Economic Union (EAEU) and the Collective Security Treaty Organisation (CSTO). China, Kyrgyzstan's main economic partner since 2016, holds over 40% of the former Soviet Socialist Republic's external debt (63% of GDP in 2022), a third of which is owed by the private sector, while Bishkek is an integral part of the Shanghai Cooperation Organisation (SCO). Although Kyrgyzstan is also trying to forge closer ties with the EU to reduce its dependence on the two giants, its relations with the West remain strained, as illustrated by the US sanctions imposed in July 2023 on four Kyrgyz companies accused of helping Russia to circumvent international sanctions by supplying it with dual-use products reused for military purposes. On a regional scale, the country is pursuing a policy of appeasement with its neighbours, even though border disputes and water-sharing conflicts are historically frequent. The dispute that has pitted it against Tajikistan for the past several decades now appears to be well on the way to being resolved thanks to Turkish mediation, thereby raising hopes of lasting peace. The last clashes, in 2021-2022, left several hundred civilians and soldiers dead, with thousands forced to flee their homes.
