Kyrgyz Republic became a full member of Eurasian Development Bank in August 2011. Its contribution to the Bank’s capital is US $100,000.
Structural imbalances in the Kyrgyz economy continued to shape its uneven business activity dynamics during the year. In Q3 2016, GDP growth accelerated to 8.3% year-on-year (there was zero growth in Q2 2016). The rates achieved in Q3 compensated the decline in the first six months of the year. As a result, GDP grew by 2% over the first nine months compared to the respective period of 2015. In terms of added value, in Q3 2016 all economic sectors achieved positive growth rates. The greatest contribution was from the industrial sector (by 3.5 percentage points) due to an increase in gold production by 1.6 times (compared to Q3 2015). High retailing indicators ensured growth in the services sector (4.4% year-on-year). Economic growth was also supported by higher outputs in construction (13.1% year-on-year) and agriculture (3.5% year-on-year).
The key factors restraining annual inflation below the benchmark were low prices in global energy and food markets as well as the stabilisation of the domestic foreign exchange market. In Q3 2016, overall prices grew by 0.5% compared to Q3 2015. The prices of services and non-food items increased by 5.9% year-on-year and those of commodities deflated (by 6.2% compared to Q3 2015). The continued deflation in the food sector and the declining growth in the prices of services and non-food items resulted in that overall price dynamics began to slow starting from September 2016. The reduction in the consumer price index in October-December 2016 was 0.3% year-on-year.
The slowed inflation in the non-food group accompanied by deflation in the food sector was one of the reasons for renewing measures to soften monetary conditions. The excessive liquidity resulted in a wide spread (of approximately 400 basis points) between the key rate and the 7-day repo rate (monetary policy operational benchmark), as well as lower activity in the interbank market and limited demand from commercial banks for loans from the National Bank of the Kyrgyz Republic to support economic growth.
Reduced growth in capital expenditure helped to decrease budget deficit from 6.9% of GDP in the first six months of 2016 to 5.3% in the first nine months. The shift towards more cautious spending resulted from lower growth of budget revenues (2.1% compared to the first nine months of 2015) and the need to pay current expenditure, which grew by 13.2% year-on-year in January-September 2016.
EDB’s priorities in Kyrgyzstan
EDB’s investment activities in the Kyrgyz Republic in 2013-2017 included the following:
- The Bank finances investment projects in the power sector, transport, mining and IT.
- SMEs in agriculture, the light and processing sectors are supported by targeted programmes fulfilled via the banking sector.
- The Bank is ready to support projects aimed at developing human capital, as well as projects in healthcare and education in cooperation with the donor club and through the Technical Assistance Fund.