Kyrgyzstan Economy Profile

Kyrgyzstan is a landlocked, mountainous, lower middle income country with an economy dominated by minerals extraction, agriculture, and reliance on remittances from citizens working abroad. Cotton, wool, and meat are the main agricultural products, although only cotton is exported in any quantity. Other exports include gold, mercury, uranium, natural gas, and - in some years - electricity. The country has sought to attract foreign investment to expand its export base, including construction of hydroelectric dams, but a difficult investment climate and an ongoing legal battle with a Canadian firm over the joint ownership structure of the nation’s largest gold mine deter potential investors. Remittances from Kyrgyz migrant workers, predominantly in Russia and Kazakhstan, are equivalent to more than one-quarter of Kyrgyzstan’s GDP.

Following independence, Kyrgyzstan rapidly implemented market reforms, such as improving the regulatory system and instituting land reform. In 1998, Kyrgyzstan was the first Commonwealth of Independent States country to be accepted into the World Trade Organization. The government has privatized much of its ownership shares in public enterprises. Despite these reforms, the country suffered a severe drop in production in the early 1990s and has again faced slow growth in recent years as the global financial crisis and declining oil prices have dampened economies across Central Asia. The Kyrgyz government remains dependent on foreign donor support to finance its annual budget deficit of approximately 3 to 5% of GDP.

Kyrgyz leaders hope the country’s August 2015 accession to the Eurasian Economic Union (EAEU) will bolster trade and investment, but slowing economies in Russia and China and low commodity prices continue to hamper economic growth. Large-scale trade and investment pledged by Kyrgyz leaders has been slow to develop. Many Kyrgyz entrepreneurs and politicians complain that non-tariff measures imposed by other EAEU member states are hurting certain sectors of the Kyrgyz economy, such as meat and dairy production, in which they have comparative advantage. Since acceding to the EAEU, the Kyrgyz Republic has continued harmonizing its laws and regulations to meet EAEU standards, though many local entrepreneurs believe this process as disjointed and incomplete. Kyrgyzstan’s economic development continues to be hampered by corruption, lack of administrative transparency, lack of diversity in domestic industries, and difficulty attracting foreign aid and investment.