Is there real economic grow of Kyrgyzstan?

GDP growth of Kyrgyzstan amounted to 7.7% in 7 month of 2022, which is a significant increase compared to the fall in previous years. According to experts, this growth is associated with both inflation and real success in the economy.

In the period January-July 2022, the country’s GDP amounted to 425.1 billion soms, an increase of 7.7% in monetary terms, the National Statistical Committee of Kyrgyzstan said. At the current exchange rate, this amount is more than $5.248 billion.

In industry, production increased by 18.7%, in agriculture – by 8.4%, in construction – by 3.6%, in the service sector – by 3.5%.

At the same time, the share of industries producing goods accounts for 37%, the service sector traditionally accounts for almost half – 46.7%. Industry accounts for exactly 20%.

Such optimistic figures allowed Kyrgyz officials to revise their forecast for economic growth in 2022. Deputy Minister of Economy and Commerce Choro Seyitov said that initially economic growth was estimated at 3.7%, but if the positive dynamics continue, then by the end of the year one can count on 4% and even 5%growth“We have a new position on inflation, it will approximately be about 14% by the end of the year”, the deputy minister added.

There are several reasons for such indicators, expert Denis Berdakov from Bishkek said. First, it should be taken into account that the nominal GDP of the Kyrgyz Republic was calculated in the national currency – in Kyrgyz soms. Given the high inflation – the rise in prices for everything, in soms, GDP also increased significantly.

Secondly, over the past year and a half, financial administration has significantly improved in Kyrgyzstan, this is a consequence of the reforms of the current government and the policy of the president. We witness that more and more digitalization is being introduced into the workflow. They also began to collect taxes more strictly, thus bringing the gray economy out of the shadows. Given that the gray economy, according to various estimates, ranged from 30 to 60%, I believe that this was the main reason for the growth.

Thirdly, and this is very interesting, a number of sectors of the economy were able to receive two or three-year profits in just six months. This is due to the fact that the Kyrgyz Republic is becoming a tourism, logistics, technology and banking hub for Russians. One of two or three hubs that works on sanctioned goods and services received by Russian citizens and companies through us.

It turns out that several reasons for this growth coincided: this is the best administration of the tax sphere and good cash flow directed here from Russia, as well as the growth of trade through Kyrgyzstan.

However, not all experts are confident in the real growth of the Kyrgyz economy. Another expert from Bishkek, Igor Shestakov, expressed doubts about the growth of the economy. In his opinion, it is not correct to compare the indicators with 2021.

According to official statistics, there is a good growth in indicators in the service sector in Kyrgyzstan. But it has always been developed and dominated in Kyrgyzstan. We have a lot of catering points, hotels. Tourism this year has revived strongly, mainly due to tourists from Russia. This became possible because Kyrgyzstan was one of the first countries to lift quarantine restrictions and removed PCR tests for entry into the country. Therefore, it is natural that the service sector here has always been one of the main drivers of the economy and, as a result, it is noticeably ahead of the industrial sector, Shestakov said.

He also believes that economic growth did not occur in all sectors of the country. In some areas of Russia, goods from Kyrgyzstan have become more in demand due to the sanctions imposed against it, for example, wood processing products.

Shestakov added that the data of the National Statistics Committee on the agricultural sector are very optimistic. “But everyone knows that recently all food products have become very expensive, some of them tripled. Meat prices are growing at an astronomical rate. Moreover, more than 60% of our food is imported. And, according to all forecasts, by the end of the year prices should rise even more. So it is not clear what we have begun to produce more. Perhaps this is just a consequence of inflation?” Shestakov asks.

“Therefore, I would not wishful thinking and would be cautious about officials’ reports about successes in the economy of Kyrgyzstan,” the expert said. He also mentioned the positive impact on the country’s economic performance of such reasons as the lack of water shortages in agriculture, the nationalization of the flagship in the mining industry, the Kumtor company, and its contribution to the country’s financial sector. Activation of the Kyrgyz-Russian Development Fund, which has financed more than 2,000 projects this year. He especially emphasized such a factor of influence on the economy of Kyrgyzstan as the transfer of money of labor migrants from Kyrgyzstan, the volume of which even increased this year.

“If the economy is growing in Kyrgyzstan, then new jobs should appear, then where are they, why do people leave anyway? Therefore, it seems to me that there is a difference between the declared successes and the real situation in the economy,” Shestakov said in conclusion,
August 25, 2022