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ORDER OF THE GOVERNMENT OF THE KYRGYZ REPUBLIC

of May 20, 2016 No. 270

About the Mid-term forecast of social and economic development of the Kyrgyz Republic for 2017-2019

For the purpose of determination of macroeconomic parameters of development and forming of the mid-term forecast of the budget of the Kyrgyz Republic for 2017-2019, according to the Law of the Kyrgyz Republic "About the state forecasting of social and economic development of the Kyrgyz Republic", articles 10 and 17 of the constitutional Law of the Kyrgyz Republic "About the Government of the Kyrgyz Republic" the Government of the Kyrgyz Republic decides:

1. Approve the Mid-term forecast of social and economic development of the Kyrgyz Republic for 2017-2019 according to appendix.

2. To the Ministry of Finance of the Kyrgyz Republic when forming the mid-term forecast of the budget to take as basis the approved macroeconomic parameters of development of the Kyrgyz Republic for 2017-2019.

3. To the ministries, administrative departments, other executive bodies, offices of plenipotentiaries of the Government of the Kyrgyz Republic in areas, the city halls of the cities of Bishkek and Osh (in coordination) to assume as a basis the approved macroeconomic parameters of development for 2017-2019 in case of development of medium-term programs and development strategies.

4. To the Ministry of Economics of the Kyrgyz Republic to perform monitoring of accomplishment of target indicators of social and economic development of the Kyrgyz Republic.

5. Declare invalid the order of the Government of the Kyrgyz Republic "About the Mid-term forecast of social and economic development of the Kyrgyz Republic for 2016-2018" of May 25, 2015 No. 317.

6. To impose control of execution of this resolution on department of economy and investments of Government office of the Kyrgyz Republic.

7. This resolution becomes effective after ten days from the date of official publication.

Prime Minister

S. Zheenbekov

Appendix

The mid-term forecast of social and economic development of the Kyrgyz Republic for 2017-2019

1. Introduction

Main objective of the Mid-term forecast of social and economic development of the Kyrgyz Republic for 2017-2019 is determination of reference points and measures of social and economic policy for state bodies, local government bodies, business entities, the population for the medium-term period by refining and specification of tendencies and prerequisites, identification of the available resources and possible risk factors for development of national economy.

The macroeconomic forecast is calculated on the basis of the analysis of economic trends for 2014-2015, assessment of the expected indicators in 2016 and considers factors of the developed actual situation.

The mid-term forecast of social and economic development of the Kyrgyz Republic for 2017-2019 is basis for project development of the Medium-term budget of the Kyrgyz Republic and can be adjusted annually or be specified as required in case of identification of new internal and external operating conditions of economy, emergence of new risk factors.

2. The brief summary of macroeconomic situation for 2014-2015

Macroeconomic conditions in 2014-2015 developed adversely for economic development of state members of the Eurasian Economic Union (further - EEU). Considerable deterioration in external terms of trade, the related secondary effects of mutual influence of economies was basic reasons for all economies.

As the major factors creating external conditions preserving downward trend of the prices of primary goods, strengthening of intensity in the financial markets, delay of economic activity in China and developing countries, and also in exporting countries of primary goods, reducing cross-border flows of the capital as a result of step-by-step turning of accommodative monetary policy to the USA and reducings liquidity in the international financial markets acted. Unevenness in growth rates of the largest world economy remains. By provisional estimate of the International Monetary Fund (further - the IMF), growth rates of world economy were slowed down with % 3,4 in 2014 to % 3,1 in 2015. Economic growth in China was slowed down with % 7,3 in 2014 to % 6,9 in 2015 too.

Table 1

Growth rates of world economy, in %

Countries

2013,

fact

2014,

fact

2015,

predv. fact



World economy

103,3

103,4

103,1

 

Eurozone

99,6

100,9

101,5

 

China

107,7

107,3

106,9


Economic development of state members of EEU in 2014-2015 happened against the background of the increased volatility of the main macroeconomic indicators - gross internal product (further - GDP), inflation, budget deficit, and also the financial markets - currency rates, interest rates, etc.

Reduction of prices of export in state members of EEU (crude oil price fell almost in time 1,6. So, the Brent oil price, as of December 31, 2015, constituted 36, 56 dollars/barrel whereas in the same period of 2014 constituted 57, 54 dollars/barrel) led to reducing the income of exporters, exerted negative impact on condition of trading balances and budgets of the sector of public administration of state members of EEU. It in turn strengthened pressure upon the international reserve assets and national currency rates, as a result risks for macroeconomic stability amplified. Growth rates of GDP of EEU decreased owing to recession in Russia and Belarus and delays of rates of economic growth in other economies of EEU. The most part of macroeconomic indicators during 2015 showed negative dynamics which was determined by the level of the internal demand and real exchange rate which are reflection of basic economic conditions and macroeconomic policy.

Following the results of 2015 in Russia and the Republic of Belarus there was negative dynamics of economic growth: - 3,7 of % and - % 3,9 respectively; in Kazakhstan and Armenia growth was slowed down to 1,2 of % and 3,0 of % respectively.

Depreciation of national currencies and transition of state members to more flexible exchange rate formation mechanism in 2014-2015 negatively affected the internal demand (consumer and investment). Strengthening of US dollar exchange rate in relation to currencies of state members of EEU averaged % 34,4.

2015 is characterized by the high level of growth of inflation in the countries - the main trading partners: Kazakhstan - 13,6 of %, Russia - % 12,9, the Republic of Belarus - % 12,0.

Table 2

Indicators of social and economic development of EEU, in %


2013.

2014.

2015.

fact

fact

predv. fact

Index of physical amount of GDP, rate of surplus in %

1,8

1,1

- 3,1

from them:

 

 

 

Armenia

3,2

3,8

3,0

Republic of Belarus

1,0

1,7

- 3,9

Kazakhstan

5,8

4,1

1,2

Kyrgyzstan

10,9

4,0

3,5

Russia

1,3

0,7

- 3,7

Investments into fixed capital,

rate of surplus of IFO in %

1,7

- 2,0

- 4,7

Inflation (IPTs), December by December, in %

106,7

111,2

112,4

Inflation (IPTs) on average in year, in %

107,1

108,1

114,1

The average salary in US dollars

863,1

796,8

545,3

Economic development of the Kyrgyz Republic during this period happened against the background of the specified external challenges / is risky. The internal and external demand which was reflected, first of all, in all types of activity of the processing production where negative dynamics of growth was observed was as a result narrowed. The capital outflow proceeded in 2015 where the specific weight made half of the arrived direct investments (% 50,6), gross accumulating of fixed capital within several quarters in a row makes negative contribution to GDP surplus. Decrease in investments is caused, first of all, by fall of the capital investments in such types of economic activity as processing industry, transport and communication, mining while investments into the fuel and energy sector increase.

Net inflow of money transfers of physical persons on 25, of % decreased and in 2015 constituted 1344, 4 million US dollars against 1811, 9 million US dollars in 2014.

Under the influence of these factors fall of the national currency rate in relation to US dollar as of December 31, 2015 constituted % 28,9. As a result of directed interventions of National Bank of the Kyrgyz Republic (further - National Bank) on smoothing of excessive volatility of rate the amount of gross international reserves for 2015 was reduced by % 9,2. In view of more rapid growth of the prices in the main countries trading partners the real effective rate of som became stronger.

After sharp increase at the beginning of year inflation began to be slowed down owing to reduction of prices in the world markets and the taken measures. Against the background of inflation delay discount rate consistently decreased from 11% to % 9,5 in May and to 8% in July, 2015. At the same time owing to the increased risks of acceleration of increase in prices, volatility in the foreign exchange market (at the end of August, 2015 Kazakhstan, being one of the main trading partners of Kyrgyzstan, passed to more flexible mode of the national currency rate) the National Bank increased in September discount rate to 10% and kept it at such level until the end of the year.

Against the background of influence of negative factors economic growth in 2015 was slowed down to % 3,5 with % 4,0 in 2014. Without the companies for mining Kumtor the surplus of real GDP constituted % 4,5, against % 5,0 in 2014. Per capita amount of GDP constituted 74, 4 thousand som and in comparison with 2014 increased on % 1,4.

Table 3

Structure and growth rates by the sectors creating GDP (1)

Indicators

2014, fact

2015, predv. fact

one million som

growth rate, %

in %

to GDP

one million som

growth rate, %

in %

to GDP

share of contribution to GDP growth,

items.

GDP

400694,0

104,0

100,0

423635,5

103,5

100,0

3,5

Industry

65938,4

98,4

16,5

64959,7

95,8

15,3

- 0,69

Agricultural industry

58976,8

99,5

14,7

59395,6

106,2

14,0

0,91

Construction

29780,3

127,1

7,4

35322,9

113,9

8,3

1,1

Services

190067,4

104,6

47,4

212901,9

103,7

50,3

1,73

Net taxes on products and import

55931,1

104,0

14,0

51055,4

103,5

12,1

0,49

Economic growth is provided with almost all sectors of economy, except the industry; the positive contribution is estimated in agricultural industry (actual growth on % 6,2) at the percent point 0,91 level, construction (actual growth on % 13,9) at the 1,1 level and service industries (actual growth on % 3,7) at the 1,73 level percent point. The negative contribution to forming of GDP was made by reducing in industry production (decrease in amounts on % 4,2) at the percent point 0,69 level which is caused by utilization of capacity on average on % 53,1 because of reducing orders owing to decrease in purchasing power in the main export markets of the republic - the Russian Federation and the Republic of Kazakhstan, noncompetitiveness of products of domestic manufacturers, shortage of current assets, insolvency of customers, insufficient demand for finished goods within the country, deficit of raw materials and materials, electricity outage. Gold production volumes on Kumtor Gold Mine and open joint-stock are lowered

society "Kyrgyzaltyn" in comparison with 2014 (% 91,7), and power generation - on % 11,2.

During the most part of year industrial production increased (in January-September, 2015 - on % 17,5), however in year it was reduced by % 4,2. Mainly it was caused by gold development reduction. Release in a number of the industries which are not connected with gold but having the high importance for economy (production of foodstuff, textile production, etc.) was below appropriate level of 2014 throughout all analyzed period. After the fall taking place in 2013-2014 growth of mining in 2015 gave essential support of the industry in time 1,6.

Reduction of amount of receipts of money transfers of physical persons is relative 2014 which was not compensated by growth of real wage, and also weakening of the national currency rate in relation to US dollar caused decrease in the consumer demand. At the same time favorable impact on demand of the population was made by increase in the size of real wage (growth on % 2,5), amounts of consumer crediting (growth on % 31,1) and inflation delay (at the expense of food group of goods). In 2015 it was succeeded to reduce the rate of inflation to unambiguous values (the consumer price index by December, 2014 constituted % 103,4, and annual average value - % 106,5 (January-December, 2015 by January-December, 2014).

Table 4

Indicators of the consumer price index (CPI)

IPTS

2014.

2015.

in % by December of previous year

110,5

103,4

in % with the corresponding period of previous year (annual average value)

107,5

106,5

Decrease in amounts of the issued mortgage loans and growth rate of investments into fixed capital promoted delay of growth in the sphere of construction. At the same time the level of capitalization of economy increased with % 26,9 in 2014 up to % 28,5 in 2015, generally at the expense of growth in volumes of the foreign credits, means of the population.

Table 5

Dynamics of growth of investment into fixed capital for 2014-2015

Indicators

2014,

fact

2015,

predv. fact

Investments into fixed capital, one million som

107884,6

120878,9

growth rate, %

124,9

108,0

investments into fixed capital into % to GDP

26,9

28,5

In the conditions of the flat internal demand the import volume was significantly reduced (by % 29,6). Deterioration in expectations of entrepreneurs of improvement of terms of trade in separate goods, generally cars, as a result of the entry of the Kyrgyz Republic into EEAS led to considerable reducing import of these types of goods on which the increased demand was observed earlier.

Despite reducing supply of gold to the foreign markets and adverse price conjuncture, its share increased and constituted 39,7 of % of total volume of commodity export of economy. Commodity export without gold was reduced stronger, reflecting smaller demand from such trading partners as Kazakhstan and Russia. Adjustment of balance of foreign trade as a result of the advancing reducing import concerning export acted as major factor of reducing deficit on the account of current transactions.

Positive dynamics of development of banking sector that was followed by increase in amount of credit portfolio, without the loans granted to banks and other financial credit institutes which as of December 31, 2015 constituted 94, 0 billion som, having increased since the beginning of year by % 19,3 (by the end of 2014 constituted 78, 8 billion som) was noted. The credit in economy in 2015 constituted 96, 2 billion som, having increased since the beginning of year by % 17,2 (in 2014 82, 1 billion som).

Following the results of 2015 the income of the government budget in comparison increased 2014 on 7, %, and expenses - by % 10,6. Decrease in amount of the received transfers was compensated by growth of tax and non-tax income. With growth of the income operating expenses on all main categories increased. The essential contribution was made by increase in expenses on compensation of workers, purchase of non-financial assets, acquisition and use of goods and services. The budget policy was oriented to increase in the state investments into infrastructure projects.

Central government budget deficit made % 1,5 to GDP (in 2014 - % 0,5 to GDP). Its covering was performed mainly at the expense of external sources.

The structure of public debt does not undergo strong changes: more than 90% are constituted by external debt. In 2015 in comparison with 2014 the internal debt in national currency grew by % 25,3, the external debt in US dollars increased by % 4,8. Rates of depreciation of national currency advance growth of economy that negatively affects the debt relation to GDP. Following the results of 2015 the level of external debt to GDP constituted % 64,5, having exceeded legislatively established threshold value in the amount of % 60,0 that is generally caused by negative tendency in the foreign exchange market and the actual amount of GDP which developed lower than forecast. Prevalence of preferential agreements in structure of external debt (% 98,6) smoothes negative effects of decrease in the currency rate.

Income of the population grew and improvement of situation in the labor market is noted. According to the main target indicators of the National sustainability strategy of the Kyrgyz Republic for 2013-2017 (further - NSUR) 70 thousand workplaces annually shall be created. In 2015 in the republic 109676 workplaces are created (in 2014 - 110252 workplaces). With assistance of public services of employment in 2015 50,7 of one thousand people was employed, is 5,5% more, than in 2014.

The average monthly nominal wage of one worker (without small enterprises) in 2015 constituted 13277 som, having increased in comparison with 2014 by % 9,2, and its actual size estimated taking into account consumer price index increased on % 2,5 (in 2014 constituted 12285, 0 som and in comparison with 2013 increased by % 0,7) that in 2,7 of time covers the size of subsistence minimum. The annual average size of subsistence minimum in 2015 constituted 4937, the 25th catfish and in comparison with 2014 increased on % 7,2. For the last 3 years the average size of pension increased by % 5,0 with 4432,0 to 4753, of 0 som.

In 2015 the specific weight of expenses from the republican budget on the social sphere (58, 6 billion som) made % 56,8 (the specific weight of expenses from the republican budget on the social sphere in 2014 made % 57,8), all 2 billion som more, than in 2014 are directed on 5,. Social obligations within the approved parameters are fulfilled.

Ensuring positive dynamics of economic growth actively progressed within the Actions plan of the Government of the Kyrgyz Republic for 2015 on strengthening of national economy (the order of the Government of the Kyrgyz Republic of February 20, 2015 No. 78) in which the actions from 38 Items aimed generally at providing sustainable development of economy and social stability during the periods of the strongest influence of external and internal adverse factors are provided what anti-recessionary actions were directed to.

For the purpose of stimulation of agricultural production the Financing of Agricultural Industry-3 project is realized (the order of the Government of the Kyrgyz Republic of March 11, 2015 No. 113) within which in 2015 commercial banks issue 9980 credits for the amount 3, to 8 billion som. On subsidizing of interest rates of commercial banks by provision of soft credits 36 million som are actually transferred to farmers from the budget in 2015 271,.

Activities of the Russian-Kyrgyz Fund of development began (further - Fund). For the purpose of support of small medium business by Fund funds in the amount 1, by 2 billion som to two banks - Ayyl Bank and RSK Bank open joint stock companies are allocated.

The Plan of the Government of the Kyrgyz Republic for development of export of the Kyrgyz Republic for 2015-2017 was implemented (the order of the Government of the Kyrgyz Republic of March 31, 2015 No. 174). The plan acts as "road map" on expansion of the export potential of the country and contains priority sectors with the high export potential.

For providing favorable conditions for business the Program of the Government of the Kyrgyz Republic for private sector development in the Kyrgyz Republic for 2015-2017 was implemented (the order of the Government of the Kyrgyz Republic of March 18, 2015 No. 129) in which implementation of number of reforms is provided: in trade and customs spheres; on optimization of tax administration; on reforming of the labor law and antitrust law.

Work on creation and maintenance of favorable conditions for development of entrepreneurship was continued. The number of permissions and licenses from 500 to 98 is reduced. Terms of conducting checks from 30 are twice reduced to 15 working days, for subjects of small business - up to 5 working days, the new companies are exempted from non-tax checks for 3 years. Work in the field of enhancement of the Counter-about 3 program which allows to collect data on all types of the inspections which are carried out by monitoring bodies by means of Internet connection online is done. Reform "Systems analysis of regulation" is started.

For the purpose of reducing scales of shadow economy the Actions plan on reducing shadow economy in the Kyrgyz Republic for 2015-2017 is accepted (the order of the Government of the Kyrgyz Republic of March 30, 2015 No. 170) which measures are directed to elimination of conditions and origins of shadow component of economy, and also on its legalization.

For increase in efficiency of use of the state assets are accepted the Privatization program of state-owned property in the Kyrgyz Republic for 2015-2017 (the resolution of Jogorku Kenesh of the Kyrgyz Republic of June 29, 2015 No. 5408-V), the Concept of reforming of state-owned property (the order of the Government of the Kyrgyz Republic of June 5, 2015 No. 244-r).

Are started the mining and processing complex (MPC) of Three-copecks Piece Ken limited liability company of the gold deposit of Taldy-Bulak-Levoberezhny (on July 29, 2015), ore complex of Kazakhmys Gold Kyrgyzstan limited liability company on the gold-copper field Bozymchak (on August 1, 2015), the Tokmok oil refinery by capacity of 400 thousand tons per year (on November 27, 2015). Amounts of oil refinery Jundah Oil Refinery in comparison with 2014 are almost twice increased.

Formation of the Kyrgyz Republic by the full-fledged member of the Eurasian Economic Union became the main event of year.

On August 12, 2015, after completion of all procedures (ratification of the Agreement state members of EEU, opening of borders), in 2015 cancelled customs, health, quarantine, phytosanitary control on the Kyrgyz-Kazakhstan site of frontier, in the territory of the republic the common customs tariff, the single commodity nomenclature of foreign economic activity of EEU, single requirements to products established by technical regulations of the Union and other regulations and provisions of the Agreement on EEU became effective;

On August 21, 2015 the decision of council of the Eurasian economic commission on cancellation of health and phytosanitary control on the Kyrgyz-Kazakhstan site of frontier which became effective on November 18, 2015 is made. Equipment of first-priority check points of the Kyrgyz Republic Manas, Osh, Torugart, Irkeshtam is carried out. Are equipped with the equipment of 7 veterinary and control throughput posts. 35 technical regulations of EEU became effective.

The Plan of measures for adaptation of the Kyrgyz Republic to conditions of the Eurasian Economic Union is developed for smoother integration in the period of difficult external conditions for functioning of economies of state members of EEU and the Headquarters on adaptation and rapid response to the risks connected with accession of the Kyrgyz Republic to EEU are created.

As a result of creation of basic conditions for maintenance of macroeconomic stability and taken collateral actions of the Government and National Bank positive dynamics of economic growth in 2014-2015 is reached and the planned social obligations are in full fulfilled.

In 2014-2015 economic and political stability is provided, however the economy of the Kyrgyz Republic remains vulnerable to impact of external and internal shocks.

3. Factors and conditions of social and economic development in operating conditions of the Kyrgyz Republic in EEU

The economy of the Kyrgyz Republic is the most open economy of the region and is characterized by high dependence on production of gold, money transfers of workers-migrants, transit trade and the external help. This dependence causes vulnerability of economy in the face of external and internal shocks where the economy of Kyrgyzstan still remains insufficiently steady.

The expected development of economy in 2016 and the forecast for the medium-term period are based on hypothesis of preserving external and internal factors / is risky which will exert impact on development of national economy, including the remaining geoeconomic situation in the countries - the main trading partners, dynamics of change of foreign economic activity, in operating conditions of the Kyrgyz Republic in integration merging of EEU, in particular:

- instability of development of world economy. In the world there are essential changes of economic processes influencing redistribution of factors of economic development between the countries and continents, emergence of the new centers of economic development;

- strengthening of the global competition, reducing the goods and geographical markets for effective positioning of state members in world economy, adverse external conjuncture;

- high importance of technology development as source of risks and as factor of emergence of opportunities for development of economies;

- gradual exhaustion of the existing competitive advantages of state members of EEU (first of all, the economies connected with raw orientation) and need of forming of new benefits;

- the preserving downward tendency of crude oil price caused by low world production activity, decrease in demand owing to delay of growth of the income, growth of the world supply (in OPEC and beyond its limits, including because of the decision of OPEC to keep production level and the expected removal of sanctions from Iran). Important factor are expectations which also have negative focus;

- high volatility of the major goods markets (gold prices, mercury, copper, products) which is consequence of growth of the offer of the majority of metals and decreases in demand from China which was their main consumer since 2000. The prices in the world market of food are usually more volatile as the offer depends on weather conditions. In 2015 the record harvest is basic reason;

- the proceeding capital outflow tendency which leads to weakening of the position of national currencies in relation to US dollar;

- decrease in dollar equivalent of net inflow of the money transfers of physical persons made through systems of transfer;

- preserving the imposed sanctions (concerning the country - the trading partner of the Kyrgyz Republic - the Russian Federation). In view of essential role of economy of Russia in EEU expansion and prolongation of sanctions pressure against Russia leads to development of secondary negative effects in state members of EEU: reducing mutual export owing to reducing the internal demand of Russia, reducing money transfers of labor migrants, decrease in investment activity, financial instability and strengthening of capital outflow;

- collapse of the stock market of China - fall of security quotations on the stock exchanges in 2016 (for information only: On January 4, 2016 the national currency rate in relation to dollar was lowered. For the first time for 4,5 of year the ratio of currencies was weaker than 6, than the 5th yuan for dollar. On February 25, 2016 the stock indexes in China decreased more than by 6%. On February 29, 2016 there was new collapse of the stock market of China. At the beginning of March, 2016 the International rating agency "Moody's" made the decision on lowering of the forecast for the credit rating of China with "stable" to "negative");

- possibility of adverse climatic conditions.

It is necessary to consider that factor that in the region geopolitical tension continues to prevail. Escalation of the conflict in east part of Ukraine or inability to settle it can cause damage and lead to prolongation or toughening of sanctions against Russia that will have secondary effects for all region. Escalation of the conflict in Syria can lead to increase in flow of refugees that will have consequences for Turkey, the Balkans and the western parts of the region. Besides, in many countries growth will be slowed down by the low prices of primary goods and weak inflow of money transfers from migrant workers.

In compartment the listed factors of negative impact on economies of state members of EEU, and also risks of distribution of the crisis phenomena can threaten sustainable economic development of state members.

Against the background of such conditions in world economy the tendency of delay of economic growth remains. For 2016 growth of world GDP is reviewed with % 3,3 to % 2,9 (2), the eurozone - with % 1,8 to % 1,7. Economic growth in Russia was reviewed towards decrease with % 2,3 to % 0,7 too, (3) Kazakhstan - with % 2,1 to % 0,5 (4).

According to the international institutes, economic growth in the countries - the main trading partners of the Kyrgyz Republic too is reviewed towards decrease (review January, 2016) (5) in Russia on 1,4 of items (with % 100,7 to % 99,3), Kazakhstan - on 1,8 of items (with % 102,9 to % 101,1), Armenia - on 0,5 of items (with % 102,7 to % 102,2), China - on 0,3 of items (% 107,0 to % 106,7).

Table 6

Growth rates of world economy and member countries of EEU, in % (6)

Countries

2015, predv.

fact

2016,

forecast

2017,

forecast

2018,

forecast

2019,

Forecast (7)

forecast June

2015.

the forecast in January, 2016.

World economy

103,1

103,3

102,9

103,1

103,1

104,0

Eurozone

101,5

101,8

101,7

101,7

101,6

101,6

China

106,9

107,0

106,5-107,0

106,5

106,5

106,3

Russia

96,3

100,7 (8)

99,3

101,3

101,5

101,5

Kazakhstan

101,2

102,1 (9)

100,5 (10)

103,3

103,4

104,2

Belarus

96,1

99,0

99,5

101,0

101,0

101,5

Armenia

103,0

102,7

102,2

102,8

103,0

103,5

World growth which, according to preliminary estimates, in 2015 developed at the % 3,1 level for the medium-term period is predicted on average at the % 3,4 level. Revival of world activity will happen more gradual rates, especially in the countries to the emergent market and developing countries.

Economies of the countries of Europe will grow in general at stable rates, with some delay in 2018-2019.

In China following the results of 2015 growth rates of GDP were slowed down to % 6,9 that became the worst figure for the last 25 years, in 2016 delay of growth to 6,5-7,0 of % and preserving bearish tendency in the medium-term period is expected. In the average and long-term period successful realization of the planned structural reforms (reorientation to internal consumption, increase in efficiency of the state investment, increase in flexibility of the labor market and labor productivity) against the background of reduction of prices of exchange goods will lead to expansion of internal consumption that will partially compensate growth delay. However in the medium-term period delay of growth of China means decrease in demand in the world commodity and raw markets. First of all it concerns energy resources and metals that is critical for export of EEU.

It is expected that in the countries with developed economy small and uneven recovery growth with gradual further reducing gap between the actual and potential production volume will continue. Delay of growth and rebalancing of economy of China, reduction of prices of exchange goods and intensity in some large countries with the emergent market will negatively continue to affect the prospects of growth in 2016-2017.

The Russian economy begins to recover smoothly from crisis, however before complete normalization of situation is still far because the ruble does not differ in the stability, the cost of oil is far not at the highest level, and the western sanctions do not allow to improve economic situation.

Mutual influence of economies - important factor which is always considered during the planning of long-term economic development, realization of short and medium-term measures of economic policy. Participation in integration consolidation strengthens not only positive mutual effects on growth trajectory, but also negative - on recession trajectory. However in turn gives instruments of coordination which allow to smooth negative impact.

In case of EEU, owing to scale, key role in integration consolidation is played by economy of Russia therefore both positive, and negative internal shocks of Russia considerably influence economy of partners of EEU. If for state members with structure of the economy close to the Russian, is first of all result of symmetric shocks, then for the Kyrgyz Republic is result of secondary effects and transfer of influence from Russia. Russia is not only the greatest consumer market, but also source of financial flows: investments and transfers in the form of money transfers of migrants.

Interaction between state members of EEU is strong, and the proceeding adverse conditions for development of economies (reduction of prices of energy carriers, purchasing power, continuation of volatility in the foreign exchange market, etc.) will exert impact on macroeconomic indicators of 2016 and the medium-term period of the Kyrgyz Republic.

Advantage factors:

- complete integration of Kyrgyzstan into EEU and preserving liberal foreign trade policy (influence peak 2016 - 2017 years);

- membership in EEU as factor of ensuring additional stability and development of economy thanks to integration measures and actions;

- increase in appeal of business environment and growth of business activity of business entities against the background of improvement of the investment climate (program implementation of the Government of the Kyrgyz Republika on private sector development in the Kyrgyz Republic for 2015-2017 (the order of the Government of the Kyrgyz Republic of March 18, 2015 No. 129);

- increase in product competitiveness of domestic manufacturers in the markets of member countries of EEU;

- growth of the volumes of investment, for investors opens the market without duties and barriers;

- development of export transactions and priority sectors with the high export potential on the basis of implementation of the Plan of the Government of the Kyrgyz Republic for development of export of the Kyrgyz Republic for 2015-2017 (the order of the Government of the Kyrgyz Republic of March 31, 2015 No. 174);

- development of the border trade constrained earlier by availability of customs control which will promote creation of new workplaces, increase in cash incomes of the population, improvement of transport, housing, social infrastructure on places;

- reduction of rules of customs administration in compliance with regulations of the Customs code of EEU, using customs clearance at the cost of goods, but not on its weight, can give essential increase in receipts;

- free movement of work and capital.

Main risks:

- slow adaptation of the Kyrgyz economy to changes of conditions of foreign trade in connection with the entry of Kyrgyzstan into EEU;

- narrowing of the consumer demand due to decrease in rates of economic growth in the countries - the main trading partners because of the developed geoeconomic situation;

- the formed high level of public debt (following the results of 2015 the ratio of public debt to GDP constituted 68, %), which can limit possibilities of fiscal stimulation, respectively, budget deficit will threaten the further growth of public debt;

- growth of costs of production and reducing competitiveness for sectors of economy with high specific weight of the imported materials because of increase in duties, weak infrastructure, product quality and accomplishment of new requirements of technical regulations of EEU;

- reducing money transfers that in turn will lead to decrease in amounts of gross output of construction, services;

- decrease in trade volumes due to change of conditions (acceptance of common customs tariff (without withdrawals), cancellation of the simplified mode of customs clearance, adoption of technical regulations of EEU, more strict rules of confirmation of conformity;

- preserving or slow overcoming barriers in border and foreign trade; growth of the competition in the domestic market from foreign producers;

- growth of costs for exporters, and in some cases - impossibility of implementation of export because the system of technical regulation accepted in EEU imposes more strict requirements to producers and products (long process of carrying out upgrade of test laboratories, reduction in compliance with requirements of the legislation of EEU in the field of sanitary and quarantine, veterinary and phytosanitary control at check points and implementation of other measures for improvement of system of technical regulation);

- the termination of deliveries of some goods to Kyrgyzstan because of growth of customs duties, decrease in goods turnover with the countries which are not entering into EEU;

- outflow of some agricultural products of the Kyrgyz production to EEU member countries, and, respectively, increase in level of prices for these products;

- outflow from the domestic labor market of skilled labor force.

Therefore development of the above-stated negative factors can be integrated to the following macroeconomic risks:

- reducing the external demand and deterioration in terms of trade with the countries - the main trading partners (reduction of demand for the Kyrgyz goods and services will lead to recession of production volumes in export-oriented industries of economy that can entail weakening of the national currency rate owing to reduction of foreign exchange inflow);

- growth of cost of import on the main food products and energy resources against the background of the present current situation in the foreign exchange market will cause additional inflationary pressure upon economy;

- decrease in the income of the population because of reduction of currency inflow on money transfers, perhaps, will increase social tension in the republic;

- decrease in amounts of receipts of private transfers will lead to narrowing of the consumer demand and reducing savings of the population, thereby to decrease in amounts in service sector, and also in housing construction (growth of economic activity is in many respects caused by growth of the internal demand (expense amount on final consumption and gross accumulating) provided with inflow of money transfers of labor migrants;

- growth in the industries of service industry involved in re-export will be slowed down (trade); general delay of economic activity in this sphere which will lead to decrease in demand for transport services is expected;

- increase in central government budget deficit owing to reducing potential credit and grant receipts when preserving the previous level of social expenses.

In these conditions preserving macroeconomic stability will be main goal of economic policy for the medium-term period.

The mid-term forecast provides more active policy of the state aimed at providing sustainable development of economy and social stability and characterizes development of economy in the conditions of acceptance of additional measures of the stimulating nature.

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