The Central Asia Prospect Kyrgyzstan Macroeconomic Indicators Show Steadiness
For Further Information:
Gary Roseman / groseman@
For Release 5:30 PM EDT, April 16, 2014
St. Simons Island, GA - Data from Kyrgyzstan’s Ministry of Economics and from its National Bank (central bank) continue to show a macroeconomic environment that is positive for investors.
The four variables used to calculate the Central Asia Prospect Index of Kyrgyzstan Macroeconomic Indicators (CAP KMI Index) are 1.) monthly GDP growth rate, 2.) changes in deposits at commercial banks, 3.) changes in international reserves at the National Bank (central bank), and 4.) the stability of the som/dollar exchange rate. A composite of these variables showed an improving business environment in Kyrgyzstan at their latest readings, which for April 2014 come from February 2014. The current reading of the Index is 111.0, down from 111.7 in March (October 2013 = 100). One variable – GDP growth – positively affected the Index and the other three had slight negative effects.
The February 2014 GDP growth rate continued to accelerate, according to the Ministry of Economics. Major contributions to growth come from continued construction growth and strong industrial production, with the service sector also growing.
Deposits at commercial banks in the country in February dropped slightly from the levels in January 2014, but both foreign currency and domestic currency deposits were still higher than in February of last year, with deposits in the national currency, the som, up 26.55% and those in foreign currency up 44.80% from their levels on February 2013, for an increase in aggregate deposits of 35.50% over the level a year ago. Deposits in February 2014 were 0.5% lower than the level reported in January 2014, slightly negatively impacting the Index. This small decrease of a half percent does not reflect a lack of confidence in the banking system but is a reaction to the recent devaluation of the currency of the largest economy in Central Asia, the Kazakh tenge. Indeed, confidence in the banking system is evident in the increased share of time deposits as a share of total deposits, even though a smaller percentage of these time deposits had maturities of three years or greater than in January 2014.
International reserves of $2.096 billion at the National Bank of the Kyrgyz Republic at the end of February 2014 were 8.44%% higher than in the previous February but 1.17% lower than in the previous month, January 2014, following a previously observed seasonal pattern of reduced reserves in the winter months. The central bank’s reserves amount to a large percentage of the country’s level of imports and remain nearly four times that year’s estimated current account deficit.
For the month of February 2014, the exchange rate of the som was slightly lower against the dollar, trading at an average of 51.42 soms to the US dollar (1 som = 1.945 US cents) for the month, compared to 49.87 soms (1 som = 2.005 US cents) for January 2014, with a standard deviation in February of soms per dollar of 0.6446 som. This level of volatility negatively impacted the Index. The devaluation of the tenge in neighboring Kazakhstan in February, and the recent changes in currency markets around the world in expectation of the US Federal Reserve’s actions affected the som’s exchange rate and its volatility. This reduction in value is not a cause for concern, given that it is not unique to Kyrgyzstan and the Kyrgyz central bank still has a strong reserve position.
CAP KMI Index
Overall, the CAP KMI Index suggests a continued positive outlook for business conditions in Kyrgyzstan.
About the Central Asia Prospect
The Central Asia Prospect is website where Dr. Gary Roseman writes about the development of Central Asia and promotes the area’s business and investment opportunities. The focus is on countries in the traditionally defined Central Asian region - Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.