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Situation Update
In September, drought conditions led to a decrease in crop yields due to abnormally high temperatures and lack of irrigation water. Other Central Asian countries are facing a similar situation as a result of climate change, which poses certain risks to the region's food security and sustainable development.
Gross Domestic Product (GDP) of the Kyrgyz Republic continued to grow and increased by 3.3 percent, adding KGS 677 billion (US $7.6 billion) to the economy in January-August 2023 compared to the same period last year. This growth was primarily driven by the improvements in the services sector (+4.5 percent) and industry (+1.2 percent). The IMF forecasts a slowdown in annual GDP growth to 3.5 percent as the impacts of the global crisis begin to affect the Kyrgyz economy in 2023.
In August 2023, inflation reached 9.5 percent compared to August 2022 (NBKR). The seasonal decline in prices of fruits and vegetables, oils and fats contributed to the decline in food inflation. Nevertheless, compared to December 2022, the country still retains the second place in the EAEU region in monthly food inflation (+4.1 percent) and the first place in non-food inflation (+8.2 percent). Rising prices are one of the main factors contributing to food insecurity.
Remittances accounted for 30 percent of GDP in 2022, with 80 percent of remittances coming from the Russian Federation that experiences economy decline. Compared to the same period of 2022, remittances decreased by 28 percent in January—July 2023, which can affect household incomes and overall economic performance, as well as contribute to further increase in poverty.
The Kyrgyz Republic continues to be exposed to market instability risks due to its high dependence on imports of socially significant food commodities, particularly from Russia and Kazakhstan, where there is high volatility in wheat prices associated with drought and the termination of the Black Sea Grain Initiative (BSGI). In September 2023,
Russian Federation wheat export prices declined by 2 percent/ percentage points compared to August 2023, but remained 6 percent/ percentage points higher than in June 2023 prior to the termination of the BSGI. Meanwhile, export prices for wheat in Kazakhstan increased by 17 percent/ percentage points compared to August 2023. In order to stabilize the domestic market, the Ministry of Agriculture (MoA) introduced a ban on exports of fodder (hay, straw, mixed fodder, bran and grain fodder), barley, and rice oats until March 2024. At the same time, the MoA developed a draft resolution of the Cabinet of Ministers on banning exports of wheat flour and wheat and submitted it for public discussion .
The growing of spring wheat crops continued under abnormally high temperatures. The gross yield of wheat is estimated to decrease by 29.7 percent and gross yield of barley may decrease by 43.6 percent compared to the same period of last year. The 2023/24 wheat output is expected at 520,000 mt – 7 percent lower than the annual average for 2018-2022 due to the larger area planted. The Italian locusts started fledging and mating in some parts of the country in August 2023, and, during January-August 2023. about 48,280 hectares of farmlands were treated with chemical methods for locust control. According to International Research Institute Climate Forecasts, in SeptemberNovember 2023, rainfall across the country is likely to be light to moderate and above the national average (60-70 percent possibility of exceeding the median rainfall), and temperatures are likely to be above normal (WFP Seasonal Monitor).
According to the National Statistics Committee data, in 2022, 33.4 percent of the population were living below the poverty line with additional 7 percent living at risk of poverty. Thus, the cumulative impact of the socio-economic challenges of recent years continues to sustain the poverty rates. Labour remittances play an important role in reducing poverty and inequality, accounting to one third of GDP and serving as an income source for 12.6 percent population: the poverty rate rises from 33.2 percent to 43.3 percent, and the extreme poverty level rises from 6 percent to 17.7 percent when income of labour migrants / remittances is excluded.