Political developments at home andabroad have been prominent this year. Domestically, a newgovernment was formed quickly after one of the coalitionparties withdrew the support to Prime Minister Satylbaldievin March, 2014. The new government, led by Prime MinisterDjoomart Otorbayev, represents the same coalition ofpolitical parties providing continuity on most policies butalso a fresh momentum for reforms in key sectors. The nextround of parliamentary elections is scheduled for the autumn2015. Internationally, the Kyrgyz Republic has made firmcommitments towards accession to the Customs Union ofBelarus, Kazakhstan and Russia while tensions have appearedin relations with some neighbors. Growth has slowed downsignificantly and we have revised our projection for realGDP growth to 3 percent for 2014 as a whole from the 4percent we projected in April. Despite robust governmentinvestment and gold exports, economic activity has moderatedas the slowdown in Russia, the winding down of operations atthe Manas Transit Center and increased tensions in traderelations with neighbors are affecting remittances andnon-gold exports. Economic activity has been furtheraffected by the poor agriculture harvest while difficultiesexpected in ensuring stable energy supply in the winter mayadd a further drag on activity in the rest of the year. Fastgrowth rates in credit to the private sector and inconstruction are leveling off as businesses report a moredifficult operating environment.
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