The developments in Ukraine and its economic consequences continue to affect global grain and energy markets, pushing food prices higher. While in the Kyrgyz Republic we see stabilization trends and some Q1 positive figures, the situation is volatile and the effects of this remain to be born by the most vulnerable. After significant depreciation in March 2022 (99 KGS per USD compared to 86 KGS in February), as of 6th May, the Kyrgyz Som appreciated by 17 percent against the dollar reaching 82 KGS per USD. The national retail prices for fuel (AI-92) and for diesel continue to gradually stabilize.
Notwithstanding the challenges for the Kyrgyz economy to recover from the effects of the COVID-19 pandemic, some current improvements were observed in early 2022. In January – April 2022, monthly Global Domestic Product (GDP) increased by 5.4 percent, compared to the previous year, adding a net 189 billion Kyrgyz Soms (USD 2.3 billion) to the economy. This increase was predominantly driven by improvements in the agriculture, construction, service sector and industry. Yet, ADB growth projection for 2022 were revised downwards from 5 percent to 2 percent. Inflation, currently at 12.4 percent (NSC), is forecasted to reach 15 percent in 2022 (ADB), the highest in the region.
Increasing geopolitical risks in the world and the region have already begun to negatively affect the recovery in the Kyrgyz Republic, most notably seen in rising consumer prices. In January – April 2022, the Consumer Price Index (CPI) increased by 12.4 percent for all goods and services and by 15 percent for staple foods, as compared to January – April 2021. It is worth noting that last year, the Government imported key food commodities in a bid to stabilise prices, which helped to prevent a further deterioration of food prices (wheat, vegetable oil and sugar were purchased for a cumulative sum of KGS 1.8 billion or USD 21.2 million). Due to the events in Ukraine, the sanctions imposed on the Russian Federation and the related destabilization of global and regional markets, importing commodities to the Kyrgyz Republic could be potentially harder this year. The CPI for fuel and lubricants is estimated to have increased by 55 percent, leading to an increase of transportation costs, which in turn has affected all other prices.
The Russian Federation has lifted the ban on the export of grain and sugar to the countries of the Eurasian Economic Union (EAEU).
While the Kyrgyz Republic produced almost 363,000 tons of its own wheat in 2021, it also imported approximately 125,000 tons from the Russian Federation. The Government has prepared a decree for the Cabinet Ministers on the introduction of a temporary ban starting from 15 February until 15 August 2022 on the export of wheat, wheat flour, sugar, vegetable oil, eggs and feed crops from the Kyrgyz Republic to other countries outside the EAEU, to ensure the food security of the country, prevent critical shortages of food and promptly respond to internal and external threats to the food market. To stabilise the market, the Government has introduced Zero VAT for the import of sugar and vegetable oil.
Last year abnormally high temperatures and lack of irrigation water led to significant lower yields across multiple key crops: wheat (-42 percent), barley (-46 percent), oil crops (-25.4 percent), sugar beet (-18 percent) and melons (-14 percent). This year, favourable weather conditions observed in April led to an increase in the pace of spring field works. Thus, as of 23 April 2022, the planting areas increased by 14 percent compared to the previous year, more specifically +20 percent for potatoes, +15 percent for vegetables and +16 percent for oil crops (sunflower, cotton and safflower). Yet, according to the European Centre for Medium-Range Weather Forecasts, rainfall from May to July 2022 is likely to be below average conditions, with only a 10-30 percent possibility remaining of exceeding the median rainfall across the country. In the same period, above average temperatures are forecasted (with a 80 percent possibility of exceeding median temperature). Above average temperatures may lead to flash floods and landslides caused by earlier than normal snowmelt that could result in crop damage in the next coming months. After last year losses, the resilience of smallholder farmers may be further challenged if abnormal dryness is also experienced this year, due to forecasted lower rainfall and higher temperatures.
The following section discusses average prices for the two weeks from 22 April to 06 May 2022, in comparison to the previous two weeks in 2022 and to the previous month, April 2022, the monthly average in February 2020 (before the COVID-19 outbreak began in the country) and the annual average of May 2021.