Real GDP growth slowed to 3.1 percent inJanuary-November 2018 from 3.7 percent in the same period of2017. This deceleration was the result of slower growth inboth gold production and non-gold industry. Exportperformance remains weak, largely on account of a sharpslowdown in gold exports, and in spite of tradeopportunities within the Eurasian Economic Union. Attractingprivate investment remains a challenge. Recent developmentspoint to limited progress in addressing structural issuesover the past few years. While the Kyrgyz Republic was ableto avoid an external shock driven recession in 2014-15, theeconomy remains vulnerable to external economic shocks givenits high dependence on an undiversified export base,workers’ remittances, and foreign aid.The fiscal positionhas improved with a strong tax revenue performance and cutsto capital outlays. This has helped keeping public debtunder control following a sharp increase in 2014-15. Withinflation pressures low, the monetary policy stance remainsrelaxed. The National Bank reduced its policy rate by 25basis points to 4.75 percent in May 2018 to support economicgrowth and has maintained a managed float of the exchangerate.Going forward, real GDP growth is forecast toaccelerate slowly to 3.9 percent by 2020 supported by allthe major sectors – industry, agriculture, construction andservices. On the demand side, growth is projected to bedriven by private consumption, investment and exports. Theeconomy will continue to benefit from large remittanceinflows and firming external demand. Strong remittances willsupport average consumption growth of around 3 percent in2018–20. However, the current account deficit is projectedto remain elevated at about 9 percent of GDP, reflectingstructural constraints, the significant import content ofpublic investment, and an indirect feed-through effect ofremittances via imports. To rebuild fiscal buffers, theauthorities are committed to reducing the deficit to 3percent of GDP by 2020.
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