Economic growth jumped to 10.5% in 2013, and the current account deficit narrowed to 10.4% of gross domestic product (GDP), reflecting a rebound in gold production. Meanwhile, inflation accelerated to 6.6%. Growth is expected to return to 6.5% in 2014 and 5.5% in 2015, while inflation should average 6.0%-7.0%. The major challenge remains enacting governance reforms to improve the investment climate and boost investor confidence.
GDP rebounded by 10.5% during 2013, driven mostly by a recovery in gold production that outpaced expectations. All sectors except agriculture showed robust growth as the private sector expanded.
On the supply side, industrial output grew by 28.0%, reflecting 45.4% growth in manufacturing driven by a near doubling of gold output from the low base in 2012. Growth in other manufacturing subsectors slowed to 3.5% from 6.1% in 2012, dragged down by declines in textiles, utilities, and the production of minerals other than gold, as well as by somewhat slower growth in construction.
Services, which provide about half of GDP, grew strongly for the third consecutive year, at 5.1%. The strongest gains were in transportation (5.8%), trade (7.0%), and hotels and restaurants (11.1%), in view of higher consumer demand and improved cross-border trade. Agriculture outperformed the meager 1.2% rise in 2012, expanding by 2.9% as gains in grain and vegetable output outweighed a small decline in livestock production.
On the demand side, private consumption is estimated to have grown by 9.9%, as higher employment, wage increases, and a rise in remittances boosted retail sales by 7.5%. Investment growth plummeted to 2.3% from the 42.1% recorded in 2012, as higher private investment was offset by a 14% decline in government investment due to cuts in lower-priority spending.
|Selected Economic Indicators (%) - Kyrgyz Republic||2014||2015|
|Current Account Balance (share of GDP)||-15.7||-15.1|
Source: National Statistics Committee, National Bank of the Kyrgyz Republic, International Monetary Fund, and ADB staff estimates.
GDP is expected to grow by 6.5% in 2014 and 5.5% in 2015. This estimate assumes that gold production remains stable and that investments in energy and transport infrastructure projects, mainly from the Russian Federation and the People’s Republic of China, materialize as expected. The projected growth slowdown in 2015 anticipates some slackening in the pace of investment projects during 2015. Government expenditures will remain a driver of economic activity amid gradual recovery in the private sector. Higher domestic demand, encouraged by greater political stability and an improved investment climate, should spur growth in the private sector unconnected to gold. Growth is expected to stabilize at about 5% in the medium term, supported by infrastructure investments and continued increases in credit.
Source: ADB. 2014. Asian Development Outlook 2014. Manila.