While the peaceful transfer of power in 2011 and the swift formation of a new government in 2012 laid the foundation for growth in the Kyrgyz Republic, low gold production nevertheless caused the gross domestic product (GDP) to contract by 0.9%. In 2013 growth is expected to rebound to 5.5%. Meanwhile, the government will begin implementing its new Sustainable Development Strategy, 2013-2017, a blueprint for building a stable society, strengthening the rule of law, and improving the investment climate.

Sources: ADB estimates.

Economic performance

GDP declined during 2012 as adverse geological factors affected gold production. Despite some recovery in gold output toward the end of the year and 5.0% growth in other sectors, real GDP contracted by 0.9%. All sectors except gold and agriculture showed robust gains, reflecting growing public confidence. Agricultural growth was hurt by a poor grain harvest.

Economic prospects

Growth is expected to rebound to 5.5% in 2013 and 4.5% in 2014 on the back of higher gold production and investments, mainly from the Russian Federation and the People’s Republic of China, in energy and transport infrastructure projects. However, gold output could fall below expectations if the political environment deteriorates, weakening investment incentives. The restoration of public confidence and greater political stability should raise domestic demand, spurring growth in the private sector apart from gold. Good economic conditions in the Russian Federation and Kazakhstan will likely promote growth by generating higher remittances and external demand. Reform in state governance also holds promise.

Source: ADB. 2013. Asian Development Outlook 2013. Manila.

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