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Kyrgyzstan to address COVID-19 challenges, trade disruptions to sustain growth, ADB says
Kyrgyzstan's economy is projected to decelerate in 2020 along with a slowdown in the country's main trade partners amid the global COVID-19 pandemic, but is seen to recover in 2021 as gold exports are expected to rise, according to the Asian Development Bank's annual flagship economic publication, the Asian Development Outlook (ADO) 2020.
Growth in Kyrgyzstan accelerated to 4.5% in 2019, from 3.8% in 2018, driven by mining and manufacturing. Industry expanded by 8.1%, while agriculture and services grew modestly by 2.6% and by 2.9%, respectively. Growth is expected to slow to 4.0% in 2020, yet, if the outbreak worsens and border closures are prolonged, growth could slow even further, ADB said in a press release on April 6. Import disruption under COVID-19 affecting raw materials, equipment, and food from the People's Republic of China and other countries will hold back manufacturing, construction, and other import-dependent industries. Growth is expected to rise in 2021, assuming the region recovers from the effects of COVID-19.
"While mining and manufacturing helped the Kyrgyz Republic register good growth in 2019, in 2020 the impact of the coronavirus pandemic continues to be felt worldwide," said ADB Country Director for the Kyrgyz Republic Candice McDeigan. "Assuming we see a recovery in the region that boosts manufacturing, construction, and other import-dependent industries, we should see a pickup in growth in 2021."
In 2019, average inflation slowed to 1.1%, compared to 1.5% in 2018. Average inflation will rise to 3.5% in 2020 on higher prices for food and other products, and may accelerate even further with border closures and depreciation of the Kyrgyz som against the US dollar. The central bank is expected to remain focused on maintaining price stability and a flexible exchange rate, and continue to intervene only to smooth excessive som (local currency) volatility, the report says.
In 2019, the current account deficit is estimated to have narrowed to 10% of gross domestic product (GDP) from 12.1% of GDP in 2018, with exports rising by 7.5% and imports shrinking by 6.3%. Meanwhile, remittances fell by 13.5%. The current account deficit is expected to widen to 12% this year due to a decrease in non-gold exports and will likely narrow to 10% in 2021.
The ADB report notes the need for the Kyrgyz Republic to continue promoting development and addressing poverty in lagging regions to foster higher and more inclusive economic growth.