Kyrgyzstan’s economic growth is accounted by the inclusion in the EEU, contribution of small business and labor migrants

3 august 2017

New issue of the bulletin on the current trends in global economy produced by experts of the Analytical Center is dedicated to the analysis of the economy of one of the former USSR Republics – Kyrgyzstan. According to the experts, Kyrgyzstan has gone through the period of rather painful adaptation to the market economy model as well as a number of social and political tribulations brought about by the 2005 and 2010 revolutions. The collapse of the USSR and the disruption of economic ties have led to an outflow of people and to the rise of labor migration to more developed countries.

In the 2000s, the economy of Kyrgyzstan was developing at quite a brisk pace, and one of the reasons behind that was the emergence of new opportunities for the Kyrgyz to work in Russia.   Kyrgyzstan’s economic stability is largely dependent on the money transfers by labor migrants that account for roughly 30 % of the GDP. As was demonstrated by the turbulent 2015 and 2016 (and devaluation of the ruble in particular) dependence on the migrant's money transfers creates certain problems for a number of key economic sectors, also affecting the stability of the foreign trade indexes.

Since 2012, the number of migrant workers has shrunk sharply, which, experts believe, indirectly shows that the social and economic situation in the country has stabilized.  However, Kyrgyzstan remains one the poorest countries of all other former members of the USSR. It is only Tajikistan that Kyrgyzstan excels in term of GDP.  The IMF forecasts read that in 2017 Kyrgyzstan’s GDP will be USD 3,700 (for comparison, Russia has USD 27,500).  Its growth is capped by the growing population.

Foreign commodity trade balance of Kyrgyzstan is stably negative: imports exceed exports by 2 to 3 times.  The country mainly imports mineral fuels, machinery and equipment, footwear and electrical appliances.  Back in 2015, more than 30 % of all imported goods, predominantly commodities, were supplied by Russia; the decrease in prices for commodities changed the situation – in 2016, China took the lead as the main exporter to Kyrgyzstan, pumping its share up to 38 %.  At the same time, Russia’s share dropped to 21 %.

According to experts, Kyrgyzstan, a mountainous country, is not lucky to possess any significant amount of commodities and hydrocarbons. However, it has a well-developed hydro power sector, on which Uzbekistan’s irrigation efforts depend.  Kyrgyzstan has 30 % of hydro power resources of all Central Asia, and only one-tenth of them are in operation.  The country meets only half of its internal demand for primary energy, being a net importer of the energy.

Accession to EEU has been instrumental to the development of Kyrgyzstan’s economy.  The government is looking forward to see an inflow of foreign investments, development of transportation corridors, and certain profit from creating common markets, for instance, that of energy resources.  Kyrgyzstan's probable development scenario expects GDP to rise 4.3 % in 2018 and 5.5 % in 2019.

The Analytical Center experts forecast that the economic growth of Kyrgyzstan will be further determined by the money brought in by labor migrants, contribution of SME and development of trade and economic ties within the framework of EEU.

The bulletin also contains key economic statistics of the world’s leading countries.

For more details – the bulletin “In focus:  Kyrgyzstan – Development despite Headwinds”.  Other bulletins on current trends in global economy can be found in the Publications section.

Picture from open sources