Country Report November 2003 Kyrgyz Republic November 2003 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. 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Kyrgyz Republic 1 Contents 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2004-05 7 Political outlook 8 Economic policy outlook 9 Economic forecast 12 The political scene 16 Economic policy 20 The domestic economy 20 Economic trends 24 Sectoral trends 28 Foreign trade and payments List of tables 9 International assumptions summary 11 Forecast summary 17 Consolidated government operations, Jan-Aug 19 Main economic policy indicators 21 Basic data, Jan-Sep 2003 23 Consumer prices, 2003 24 Manufacturing production, 2003 27 Gross agricultural output, Jan-Sep 27 Main macroeconomic indicators 29 Composition of trade, Jan-May 2003 30 Direction of trade 31 Balance of payments, national series 33 Main external indicators List of figures 12 Gross domestic product 12 Consumer price inflation 21 Real GDP growth, Jan-Sep 2003 22 Nominal monthly wage 24 Gold output 32 Debt stock Country Report November 2003 www.eiu.com © The Economist Intelligence Unit Limited 2003 Kyrgyz Republic 3 Summary November 2003 Outlook for 2004-05 The president, Askar Akayev, is likely to seek ways in which to remain in power beyond the December 2005 presidential election, despite his repeated claims that he will stand down from office when his term expires. At this stage, the Economist Intelligence Unit expects Mr Akayev’s supporters to try to change the constitution in order to allow the president an extra term in office, at least. In any case, Mr Akayev now has life-long powers with which to exert influence behind the scenes, even if he is unable to keep the presidency. Electoral considerations, together with the need to support an impoverished population, will prevent the government from tightening fiscal policy. However, a marked loosening is unlikely, since it would jeopardise much-needed financial assistance from the multilaterals. The impact of loose fiscal policies will also be mitigated by tight monetary policy, which will help to keep average annual inflation low, at around 3-4%. Despite continued problems with revenue collection, tax performance will be helped by a rebound in the gold sector and a gradual upturn in foreign investment from Russia and Kazakhstan. These factors will also sustain real GDP growth at around 4.5-5.5%. However, growth will be constrained by rising imports, which will also keep the current account in deficit. The political scene The president has reiterated his intention to stand down in 2005, but the increasingly harsh measures taken by the authorities to discredit and thwart the opposition cast doubt on the reliability of his statements. Hizb-ut-Tahrir (Party of Freedom) continues to be perceived as the Kyrgyz Republic’s primary security threat. Russo-Kyrgyz relations have strengthened with the official inauguration of the Russian military base at Kant, and by efforts towards closer economic co-operation. Economic policy After a strong first half, rising expenditure has led the IMF to express concerns about fiscal overshooting. The draft budget for 2004 implies a deficit of 0.6% of GDP, using the Economist Intelligence Unit’s macroeconomic assumptions. The domestic economy Real GDP grew by 5.1% in January-September 2003, a rebound largely explained by a recovery at the Kumtor gold mine. Inflation remained essentially flat over the first nine months of the year. Although average wages remain low, even by regional standards, real incomes continued to grow strongly in the third quarter of 2003. Foreign trade and payments The first-quarter current-account balance was in surplus, but trends in merchandise trade over the first eight months of 2003 suggest that it will return to deficit as the year progresses. Gold sales continued to dominate in the Kyrgyz Republic’s markets outside the Commonwealth of Independent States (CIS), and electricity exports are becoming increasingly important within it. Editors: Dafne Ter-Sakarian (editor); Anna Walker (consulting editor) Editorial closing date: November 13th 2003 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report November 2003 www.eiu.com © The Economist Intelligence Unit Limited 2003 4 Kyrgyz Republic Political structure Official name Kyrgyz Republic Constitution The Kyrgyz Soviet Socialist Republic declared its independence in August 1991 and changed its name to the Kyrgyz Republic. Its constitution was approved on May 5th 1993. The president’s powers were enhanced by a referendum held in February 1996. Further changes to the presidency and the constitution were made in a referendum held in February 2003 National legislature The 313-member Jogorku Kenesh of the Soviet era was divided in 2000 into a 105-member bicameral parliament, elected for a five-year term National elections February 20th and March 12th 2000 (parliamentary) and October 29th 2000 (presidential); next elections due in February 2005 (parliamentary), November-December 2005 (presidential) Head of state The president, Askar Akayev, was elected unopposed in October 1991; he was re-elected in December 1995, with 71.6% of the vote, and in October 2000, with 74% of the vote National government The president appoints a prime minister, who forms a government. The present cabinet was formed in June 2002 Main political parties Communist Party of the Kyrgyz Republic; Asaba National Revival Party (nationalist); Erkin, the Kyrgyz Republic Progressive and Democratic Party (Erk; nationalist); Ata-Meken Socialist Party (social democratic); Democratic Movement of the Kyrgyz Republic; Union of Democratic Forces; Democratic Party of Women; War Veterans’ Party; Moya Strana (My Country) Prime minister Nikolai Tanayev Head of the National Security Service Kalyk Imankulov First deputy prime minister Kurmanbek Osmonov Deputy prime minister Dzoomart Otorbayev Deputy prime minister; minister of transport & communications Kubanychbek Zhumaliyev Key ministers Agriculture Aleksandr Kostyuk Defence Esen Topoyev Ecology & emergencies Satyvaldy Chyrmashev Education & culture Ishenkul Boldzhurova Finance Bolot Abildayev Foreign affairs Askar Aitmatov Foreign trade & industry Sadriddin Dzhiyenbekov Health Mitalip Mamytov Interior Bakirdin Subanbekov Justice Daniyar Narymbayev Labour & social affairs Roza Aknazarova State property & investment Ravshan Zheyenbekov Tour ism & spor ts Okmotbek Almakuchkov Central bank chairman Ulan Sarbanov Country Report November 2003 www.eiu.com © The Economist Intelligence Unit Limited 2003 Kyrgyz Republic 5 Economic structure Annual indicators 1999a 2000a 2001a 2002a 2003b GDP at market prices Som bn 48.7 65.4 73.9 75.2 89.8 GDP US$ bn 1.2 1.4 1.5 1.6 2.0 Real GDP growth (%) 3.7 5.4 5.3 -0.5 6.0 Consumer price inflation (av; %) 35.9 18.7 6.9 2.1 3.0 Population (m) 4.8 4.9 5.0 5.1 5.1 Exports of goods fob (US$ m) 462.6 510.9 480.2 498.1 582.1 Imports of goods fob (US$ m) -551.0 -506.3 -441.2 -552.0 -635.9 Current-account balance (US$ m) -252.0 -125.9 -52.6 -85.1 -69.2 Foreign-exchange reserves excl gold (US$ m) 229.7 239.1 263.5 288.9 414.2 Exchange rate (av) Som:US$ 39.01 47.70 48.38 46.94