22.06.2020-28.06.2020 • No: 265

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IMPACT OF COVID-19 ON THE KYRGYZ ECONOMY The coronavirus outbreak affected almost a reality, this decline will be the worst per- COVID-19 pandemic has reached $242 mil- the entire world, causing one of the largest formance among the Central Asian coun- lion. economic crises since the Second World tries. It is expected that the crisis will signif- Consequently, the economic recovery in the War. The leaders of almost all countries of icantly affect state budget revenues. Experts country requires emergency measures and the world, including , are trying note that the country may lose more than long-term investments. No virus outbreak to find a balance between protecting public half of its treasury’s income, or almost 85 has ever caused such severe economic con- health and maintaining the normal operation billion soms (about $1.135 billion). Never- sequences globally. Even in countries with of the economy with minimal damage. For theless, it is not yet clear how long the developed economies, economic activities Kyrgyzstan, this crisis can be described as COVID-19 outbreak will last and what the have almost halted. There is a risk that the one of the most severe since the country specific consequences will be. economic consequences of prolonged quar- gained independence. Moreover, its scale is There are approximately 12,000 small and estimated to be more severe than the crisis medium-sized enterprises in Kyrgyzstan. antine and the devaluation of the national Kyrgyzstan faced after the collapse of the More than half of these are in . The currency may have long-term effects on the . nationwide in the coun- Kyrgyz economy. There is a possibility that The first COVID-19 cases in Kyrgyzstan try left the majority of the enterprises with- thousands of small and medium-sized enter- were registered on March 13, 2020 when out income and workers without jobs. These prises will cease their activities. Another three citizens returning from include hotel facilities, travel companies, point is that unemployment rates will in- tested positive for coronavirus. Under the catering businesses, shopping malls, beauty crease sharply with the return of migrant decree of resident Sooronbay Jeenbekov, a salons, car washes, taxi services, and others. workers who have lost their jobs in neigh- state of emergency was announced on In Kyrgyzstan, the service sector accounts boring countries. It is worth noting that be- March 25, 2020. The authorities also im- for about 50% of the country’s economy. fore the pandemic Kyrgyzstan was among posed a curfew in six of the seven regions of Half of the country’s 2,600,000 working- the countries that were most dependent on the country. age citizens are employed in this sector. Ex- remittances from migrant workers as a per- According to the official website Covid.kg perts estimate that the service sector will de- centage of GDP (33%). Experts predict that that provides statistical data related to the cline by 70% in 2020. In other words, the anticipated 15% decline in remittances coronavirus situation in Kyrgyzstan, as of 500,000 to 700,000 Kyrgyz citizens con- this year will translate into a loss of approx- June 20, 2020, the number of coronavirus front the risk of becoming unemployed. imately $361 million, or almost 5% of GDP, cases in the country exceeded 3,000, while Taking this into account, as well as inflation, for Kyrgyzstan. the number of people who lost their lives the budget execution in 2020 may amount to reached 37. Nowadays, the country is ad- 45-50% only. In other words, Kyrgyzstan’s In terms of measures to be taken against the versely affected not only by the virus but budget, which is $2.2 billion, is expected to crisis, assisting socially vulnerable popula- also by the economic recession. According be reduced by up to $1 billion. The budget tion groups should be the priority for the to experts, the situation is worsening day by of the country for 2020 was approved at the Kyrgyz government. At the same time, ad- day. At the beginning of the pandemic, most level of 163 billion 710 million soms (ap- ministrative reforms can create opportuni- economists projected global economic proximately $2.185 billion). The govern- ties for economic growth and stability. Be- growth rates for 2020 to be negative. In ad- ment expected to receive 93 billion soms sides, one of the best ways to fix the coun- dition, it is estimated that significant de- (about $1.241 billion) in taxes and 35 billion try’s economy is to attract long-term large- clines in revenues may occur worldwide, soms (around $467 million) in customs du- scale investments. New investments in hy- and Kyrgyzstan is not an exception. The ties. However, this year, the risk of not dro and solar energy, as well as new projects coronavirus outbreak can cause an eco- reaching the budget revenue to be obtained on the purification of drinking water, will nomic stagnation in Kyrgyzstan and a rise in in taxes and customs duties appears to be not only create jobs but will also improve unemployment and poverty towards the end quite high. the quality of life in Kyrgyzstan. of the year, even if the country succeeds in According to the latest data, the IMF Board In this period, long-term credit supply and overcoming the disease stage. of Directors approved $80.7 million in assis- cooperation with strategic investors play a Before the COVID-19 pandemic, the Kyr- tance to Kyrgyzstan under the Rapid Financ- significant role. In addition, it is possible to gyz government estimated the Gross Do- ing Instrument (RFI) and $40.4 million un- increase the country’s national debt to a lim- mestic Product (GDP) growth to be at 5%. der the Rapid Credit Facility (RCF). This is ited extent, under conditions of new re- However, due to the COVID-19 outbreak, the second IMF emergency assistance to economic forecasts for practically every Kyrgyzstan since the outbreak of the pan- forms, business development, and increased country, including Kyrgyzstan, have deteri- demic. Thus, on March 26, 2020, the IMF tax base. At the same time, there should be orated sharply. Today, Kyrgyzstan is in- Board of Directors approved the allocation full transparency in terms of how these loans cluded in the list of the countries economies of $120.9 million, then on April 6, 2020, are spent. Investments should be attracted of which will suffer most from the pan- they decided to increase the annual emer- not only to the energy sector but also to the demic. According to the projections of the gency funding amount provided under the social infrastructure. All these measures can International Monetary Fund (IMF), the RCF to 100%. Thanks to the additional allo- create necessary conditions for a gradual, if GDP of Kyrgyzstan will contract by 4%. If cation of funds, the total amount of loans not immediate, recovery of the country’s the forecast regarding Kyrgyzstan becomes provided to Kyrgyzstan to combat the economy in the long term.

Written by Zhandos Ranov, Eurasian Research Institute,

Politics, Foreign Affairs, and Security Economy, Finance, and Energy Society and Culture  The Collective Security Treaty Organiza-  The government of Kazakhstan will up-  Prime Minister of Kazakhstan Askar Ma- tion (CSTO) and the Russian Ministry of date the Strategic Development Plan for min met with Director General of the Rus- Internal Affairs jointly draft a new anti- 2025 to incorporate a new mechanism sian Roscosmos state corporation Dmitry drug strategy of the CSTO member states called the “institute of regulatory appeal”, Rogozin. The parties resolved the main is- for the period until 2025. Since 2003, the which will allow entrepreneurs and busi- sues related to the launch of the Baiterek CSTO has been conducting anti-drug op- ness associations to cancel or suspend de- joint project that provides for the creation erations under the code name “Channel” to cisions of central and local governmental of the Soyuz-5 launch complex at the Bai- counter illegal drug trafficking. As a re- bodies by filing a complaint. Moreover, konur Cosmodrome. According to the pre- sult, in 2017-2019, the law enforcement the government will reduce control and su- liminary agreement, will be re- authorities seized more than 67.6 tons of pervision, continue to improve financial sponsible for the rocket construction, narcotic substances (RIA Novosti, measures of state support, and minimize while Kazakhstan will bear infrastructure 23.06.2020). requirements for licenses and permits to costs (Roscosmos, 26.06.2020).  Russia held a military parade to celebrate simplify market entry for new businesses the 75th anniversary of the World War Two (The Astana Times, 24.06.2020).  According to the Ministry of Foreign Af- fairs of Kazakhstan, the country sent a victory. Initially scheduled for May 9, it  The Asian Development Bank (ADB) ap- was postponed because of the coronavirus shipment of humanitarian assistance to Af- proved a $1 billion assistance package to ghanistan. The cargo, which was delivered pandemic. Presidents of Belarus, Mol- help Kazakhstan mitigate the adverse im- dova, Serbia and all the Central Asian in 46 railway wagons, included 1,900 tons pacts of the COVID-19 pandemic and a of flour, 500 tons of pasta, 4,000 liters of states, except Turkmenistan, arrived in similar $500 million loan to . to attend the event, but Kyrgyz According to the ADB, its aid will support sunflower oil and 200,000 cans of con- President Sooronbay Jeenbekov returned measures aimed at improving the health densed milk. The government of Afghani- to Bishkek after two people in his delega- policy, maintaining social protection and stan will distribute food products among tion tested positive for COVID-19 (Reu- the employment level, as well as economic the Afghan regions in need (Tengrinews, ters, 24.06.2020). stimulus plans introduced by the govern- 22.06.2020).  Turkmenistan and Uzbekistan held online ments of the two countries (,  The Turkish Cooperation and Coordina- consultations on political and economic is- 25.06.2020). tion Agency (TIKA) provided humanitar- sues at the level of deputy ministers of for-  The Turkmenistan- Joint ian aid to people affected by the dam col- eign affairs. The parties discussed the de- Committee held its 19th session in the lapse in the Sardoba district of Uzbeki- velopment of the political-diplomatic dia- online format to discuss prospects for ex- stan’s Syrdarya region. Seven semi-trailer logue between the two countries and ex- panding bilateral trade and economic co- trucks delivered 4,000 beds, quilts, pil- pressed readiness to continue cooperation operation. The parties addressed opportu- lows, and bed linens to the regional gover- in the framework of international and re- nities for partnership in the agricultural nor’s office to be distributed to those in gional structures. They also addressed is- sector, the fields of energy, transport, com- need. As stressed by the TIKA representa- sues of economic cooperation, including munications, digitalization and environ- tive, the agency would continue to stand in in the fields of trade, transport, transit, en- mental protection, and the humanitarian solidarity with the people of Uzbekistan in ergy, and water management (MFA of sphere. They paid particular attention to both good times and bad times (Kun.uz, Turkmenistan, 23.06.2020). the consolidation of efforts for efficiently 27.06.2020).  Following the meeting of the joint inter- combating the COVID-19 pandemic and  The Yunus Emre Institute’s Moscow governmental - commis- overcoming its negative socio-economic branch, the Embassy of in Russia sion on economic cooperation held in consequences (Turkmenistan Today, and the Turkish Linguistic Society orga- Kiev, Hungarian Foreign Minister Peter 25.06.2020). nized the international online conference Szijjarto explained why his country  The coronavirus pandemic caused a 30% “Teaching Turkish in Russia and academic blocked talks of the Ukraine-NATO Com- decline in revenue for 60% of Russian papers on Turkey and Turkology”. Turk- mission. According to Szijjarto, Budapest small and medium-sized enterprises seeks to resolve issues related to the rights ish and Russian Turkologists discussed the (SMEs), while only 10% of such busi- history of studying Turkish and other Tur- of the Hungarian minority in Ukraine’s nesses currently make profit. As a result, Zakarpattia region as soon as possible. In kic languages in Russia, the translation of the Russian government is adjusting its na- books of Turkish authors, and the teaching particular, Hungary insists that Ukraine tional project aimed at supporting them. must restore the access of ethnic Hungari- of the Turkish language and literature dur- ans to education in their mother tongue Currently, the main targets of the project ing the pandemic (St. Petersburg Univer- (UNIAN, 25.06.2020). are to increase the share of SMEs in the sity, 25.06.2020). country’s GDP up to 32.5% and the num- Kyrgyz and Uzbek officials and supreme  According to Georgian Prime Minister ber of people employed in this sector up to  Giorgi Gakharia, who presented his annual 25 million by 2024 (TASS, 25.06.2020). muftis met in Kyrgyzstan’s Batken region report to the parliament, Russia is a key to discuss topical issues in the religious challenge for Georgian security and is re-  President of Moldova an- sphere, such as preserving stability in so- sponsible for all human rights violations in nounced that Russia would extend the ciety and strengthening interethnic har- the Georgian occupied regions of Abkha- preferential trade regime with Moldova mony and interfaith tolerance. The parties zia and Tskhinvali. As stated by Gakharia, starting July 1. Under the regime, Moldo- also considered ways to raise literacy of Georgia’s Euro-Atlantic integration is in van exports of fruits, vegetables, preserved religious leaders and civil society in the progress and the country’s final goal is the food and wine products to Russia will be process of building a platform for inter- NATO membership, which includes the exempt from customs duties. According to state dialogue. A reciprocal meeting was creation of “effective armed forces” com- Dodon, these preferences will enable Mol- dovan producers to save at least €20-25 later held in Uzbekistan’s Fergana region patible with NATO forces (Agenda.ge, (Kabar, 25.06.2020). 26.06.2020). million per year. Moreover, Russia agreed to provide additional privileges for Mol-  The convened via vide-  The OSCE organized a two-day online dova’s transport companies (TASS, oconference the fifth meeting of the min- training on anti-money laundering and 25.06.2020). isters in charge of tourism of its member combating terrorist financing in Nur-Sul- and observers states. The parties agreed to tan. About 50 officials from law-enforce-  According to the press service of Naftogaz, the national oil and gas com- coordinate their efforts in the fight against ment agencies and the financial sector par- COVID-19 in the tourism sector by shar- ticipated in the event. Experts from Geor- pany of Ukraine, in June 2020, the whole- gia and Italy delivered presentations on sale price of natural gas for the population, ing information and best practices. They laundering schemes of illegal incomes and heat producers and other protected con- also noted the importance of applying recommendations by the Financial Action sumers decreased by 6% compared to May technology and digitalization in the tour- Task Force to prevent such schemes. Par- 2020 – to 2.14 hryvnia per cubic meter. ism industry, such as creating a single map ticipants were also familiarized with the Since January 2020, the gas price for the of tourist destinations of the Turkic coun- concept of beneficial ownership and population has fallen by 54% and by 61% tries, organization of virtual tours, and money laundering risks associated with le- compared with the relevant period last launching a tourism TV channel (Turkic gal persons (OSCE, 23.06.2020). year (Ukrinform, 23.06.2020). Council, 23.06.2020).

Prepared by Dauren Aben and Kanat Makhanov