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- GDP (PPP):
- $20.1 billion
- 3.5% growth
- 4.5% 5-year compound annual growth
- $3,363 per capita
- Inflation (CPI):
- FDI Inflow:
The Kyrgyz Republic is one of Central Asia’s poorest countries and is sharply divided along ethnic lines. Despite implementation of some reforms, overall improvement in the entrepreneurial environment has been slow and uneven. Political turmoil has contributed to policy volatility and uncertainty, hampering economic development. Political rivalries and powerful vested interests have held back implementation of deeper structural reforms.
With remnants of the former Communist system evident in many areas, the economy lacks the institutional foundations necessary for the advancement of economic freedom. Weak rule of law fosters pervasive corruption and ownership insecurity, undermining private-sector investment and business growth.
Weak governance under President Almazbek Atambayev, elected in 2011 with Moscow’s support, has encouraged extremist threats, organized crime, and corruption. The Kyrgyz Republic is a member of the Eurasian Economic Union. The economy depends heavily on gold exports and remittances from Kyrgyzstani migrant workers, primarily in Russia, who have been negatively affected by declines in the Russian economy. Cotton, tobacco, wool, and meat are the main agricultural products, but only tobacco and cotton are exported in any quantity. Foreign investment from Russia has been strong in the past, but its continuation is far from certain. This has led many in the political elite to question Russia’s reliability as a long-term partner.
Protection of property rights is weak. The judiciary is not independent and is dominated by the executive branch. There are numerous credible reports that judges pay bribes to attain their positions. Corruption is pervasive in Kyrgyzstani society. Despite some anticorruption efforts, the country is trapped in a cycle in which predatory political elites use government resources to reward clients, including organized crime figures, and punish opponents.
The personal income and corporate tax rates are a flat 10 percent. Taxation remains erratic and poorly administered. The overall tax burden equals 20.8 percent of total domestic income. Government spending has amounted to 38.7 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.7 percent of GDP. Public debt is equivalent to 68.8 percent of GDP.
The overall regulatory environment is still hampered by bureaucratic impediments to private-sector production and investment. Reforms have not yet resulted in the structural changes that are needed to foster efficiency. The formal labor market has not been fully developed. Agricultural sector growth has been financed by subsidized lending. In 2016, the government told the IMF that it intends to reduce subsidies and transfers to 3 percent of GDP.
Trade is extremely important to the Kyrgyz Republic’s economy; the value of exports and imports taken together equals 125 percent of GDP. The average applied tariff rate is 2.3 percent. In 2016, the government banned the use of foreign currency. State-owned enterprises distort the economy. Financial intermediation has continued to increase, but credit costs remain high. The banking sector remains vulnerable to political interference.