Published
07/05/2025, 11:25Macroeconomic factors continue to have a significant impact on business development and job creation in Kyrgyzstan, exacerbating institutional and political constraints. This is stated in the analysis of the World Bank.
Since the early 2000s, the economy has experienced national income growth and real effective exchange rate (REER) appreciation of about 20 percent between 2003 and 2019. This was due to the expansion of natural resource exports and large-scale inflows of workers' remittances. However, this growth reduced the competitiveness of Kyrgyz exports in world markets and made imports relatively cheaper. As a result, the structure of production has shifted in favor of industries producing non-tradable goods, such as services and construction.
According to the study, the share of non-tradable goods in GDP rose from 43 percent in 2000 to 70 percent in 2019, and the trade deficit increased by about 23 percentage points of GDP. Experts attribute this trend to manifestations of the so-called “Dutch disease,” which hinders the development of dynamic export-oriented industries and holds back productivity growth.
“Dutch disease” reduces the competitiveness of industry, resulting in slower productivity growth and limiting the creation of high-productivity jobs. It is also one of the reasons for large-scale labor migration and significant inflows of remittances, which further affect the economy.
