The growth of Kyrgyzstan's GDP in 2023 is not expected to exceed 3.5% due to a decrease in gold production in the country and a decline in the agricultural sector, as predicted by the World Bank. This forecast was provided in the autumn macroeconomic review for Europe and Central Asia, Economist.kg reports.
As for demand, the World Bank expects that consumption and investments will support economic growth in Kyrgyzstan, while net exports are forecasted to make a negative contribution. Without structural reforms, it is anticipated that the potential GDP growth rate in the medium term will be only 4%.
The report also states, "Inflation is expected to remain elevated at 12% in 2023, driven by rising tariffs for electricity and other utilities." The World Bank anticipates that the National Bank of Kyrgyzstan will maintain its monetary policy, and inflation is expected to gradually decrease to 7% by the end of 2025.
The current account deficit is projected to be around 29% of GDP in 2023 and is expected to decrease in 2024-2025 as external demand for non-gold goods and an increase in service exports improve. Analysts at the World Bank predict that the deficit will be financed through inflows of foreign direct investment and external borrowing.
The Institute for Development also expects that Kyrgyzstan's budget deficit will increase slightly to 1.6% of GDP in 2023 due to the annual impact of raising public sector wages and social benefits, which will limit the reduction in overall expenditures compared to the expected decrease in non-tax revenues and subsidies. Furthermore, the budget deficit is projected to increase to 2.6% of GDP in 2024 due to capital expenditures and decrease to 2.1% in 2025 alongside expenditure consolidation by the government.
"In 2023, high food prices, lack of job security, and reduced remittances will continue to be the most serious issues affecting the well-being of the population of Kyrgyzstan," the report states.
The World Bank acknowledges that there are significant risks to this forecast. A worsening of the Russian economy could lead to further reductions in remittances. Stricter enforcement of existing international sanctions against Russia or the imposition of secondary sanctions against companies based in Kyrgyzstan could significantly impact trade and domestic economic activity.
CentralasianLIGHT.org
October 6, 2023