Recent Economic Developments
The Kyrgyz economy has proved more resilient than expected to the spillovers of the war in Ukraine and sanctions on Russia. Real GDP grew 7.7 percent during January-July, yoy, supported by industry, agriculture, construction and services. Growth was driven by domestic demand which in turn was supported by solid remittance inflows (7.5 percent growth in US$ terms) from Russia, aided by a strong Russian ruble.
Inflation increased to 13.8 percent in July from 11.2 percent in December 2021, driven by food and fuel prices following the global trends. In the first 7 months of 2022, the fiscal position was solid with a surplus of 1.4 percent of GDP. Total revenues increased to 45.9 percent of GDP from 38.6 percent a year ago, driven by higher tax revenues.
Spending increased to 44.5 percent of GDP from 37.2 percent a year ago driven mainly by capital outlays. The surplus, along with the appreciation of the national currency helped reduce the public debt burden to an estimated 49 percent of GDP by end July 2022. The current account deficit significantly increased to an estimated 15.2 percent of GDP in H1, 2022 because of a sharp reduction in gold export and a surge in imports.
GDP growth is expected at 4 percent in 2022. Consumption will be supported by remittances and investment spurred by high public outlays, while net exports are expected to contribute negatively to growth. Inflation is expected at about 15 percent by end-2022. The fiscal deficit is expected to widen in 2022 due to the decision of the Cabinet of Ministers to increase social transfers and public sector salaries in 2022. The current account deficit is projected to remain high at about 13 percent of GDP in 2022, reflecting the fall in gold exports.
The poverty rate is expected to increase to 25.5 percent in 2022 (at the $3.65 a day, 2017 PPP poverty line) from 21.8 percent in 2021, and 18.7 percent in 2020. High inflation remains the most immediate concern for the welfare of the population. Increases in public sector salaries and in pensions, and the enhancement of the social protection program have softened the negative impact of the food price increase on the population. The intention of the authorities to further scale up and extend the social protection program will help protect the most vulnerable part of the population.