Revenue deceleration in Kyrgyzstan results from reduction of foreign grants, although tax revenues continued to increase - EDB

AKIPRESS.COM - Deceleration of revenue growth resulted from reduction of foreign grants and organizations, although tax revenues continued to increase in Kyrgyzstan, the Eurasian Development Bank reported in Eurasian Economic Integration 2019.
The state budget deficit at the end of 2018 stood at 1.1% of GDP, down from 3.1% the year before. Deficit reduction was attributable to reduction of public expenditures and modest growth of revenues.
Government debt decreased in absolute terms, primarily due to debt relief provided by Russia pursuant to a recently signed agreement between the two countries.
After a two-year economic recovery period, Kyrgyzstan's GDP growth decelerated from 4.7% in 2017 to 3.5% in 2018 due to production cutbacks at the Kumtor gold mine and stabilization of growth rates in the other sectors of the economy at levels close to the potential level.
Domestic demand growth throughout 2018 was unstable, reflecting the volatility of the population's real monetary income. That growth was dampened by deceleration of credit activity and reduction of fund transfers by labour migrants in 2018 vs. 2017, and by deferred demand from the public sector.
Deviations of inflation from target values throughout 2018 were attributable to low prices in the global food markets and realization of the high base effect in the vegetable and solid fuel segments.
Increase of the current account deficit occurred against the background of a growing goods/services trade deficit, even though net inflow of current transfers remained virtually the same as in 2017.
With inflation remaining low, in May 2018 the National Bank of the Kyrgyz Republic reduced the refinancing rate from 5.0% to 4.75%, and repeatedly revised the interest rate corridor throughout the year.
In 2019 economic activity in Kyrgyzstan is projected to pick up, largely due to optimistic gold extraction forecasts and moderate expansion of public sector demand. Over the medium term, the economy is expected to continue to grow at a steady rate close to the potential rate.
Inflation rates will change in line with prices in global food markets. According to our estimates, world food prices will begin to recover in the first half of 2019, to stabilize by the beginning of 2020, which will affect the growth trajectory of the consumer price index in Kyrgyzstan.