AKIPRESS.COM - The Eurasian Development Bank’s (EDB) analysts forecast the Kyrgyz Republic’s GDP growth to slow down in 2020. This finding is presented in the Macroeconomic Review published by the EDB’s Directorate for Research.
In 2019, the country’s GDP growth accelerated to 4.5%, largely due to increased production at the Kumtor mine where gold outputs exceeded the company’s planned indicators. The key drivers of economic development among other sectors were services and construction.
The factors that are expected to limit GDP dynamics include lower gold outputs at the Kumtor mine, as well as the negative effects of the spread of coronavirus, which will weaken external demand and limit outputs in the real sector. International financial aid is expected to facilitate fiscal manoeuvres aimed at supporting the economy. It should be emphasised that the EDB’s forecast considers the above factors only in part, as the cut-off date for its preparation preceded the period of the most rapid spread of coronavirus in the world and the introduction of stringent measures to curb it.
The review notes that pressure on the Kyrgyz som toughened in early 2020 amid fears that coronavirus would affect the global economy. EDB analysts forecast these factors to persist in the coming months and the exchange rate of the national currency against the US dollar to remain around the current levels. In the future, as the global economic situation stabilises, the som is projected to partially win back its positions.
Aigul Berdigulova, Analyst of the EDB’s Economic Analysis Department, suggests that the depreciation of the national currency will have an inflationary impact in the current year. At the same time, she expects that the increase in consumer prices in 2020 will be near the lower threshold of the target benchmark set by the National Bank of the Kyrgyz Republic because of the weak pricing environment in foreign commodity markets and limited domestic demand.
The review suggests that the prevailing risks in the short term are associated with restrained economic activity. The main reason for this is that it is currently difficult to predict the consequences of the spread of coronavirus for the global economy as the scale of the pandemic and its duration remain uncertain. EDB analysts assume that the negative effects will concentrate on the demand side and will not impact significantly the production potential. Otherwise, the consequences for the Kyrgyz economy may occur to be longer and tougher. It is also probable that oil prices will remain low for a longer period than envisioned by the Bank’s base-case scenario and that this factor will have a stronger impact on Russia’s economic growth, which may affect remittances and Kyrgyz exports.