By CentralBankNews.info
The central bank of the Kyrgyzstan left its benchmark discount rate at 5.0 percent to help stimulate the economy and said a continuation of the current direction of monetary policy is possible in the absence of external and international inflationary shocks.
The National Bank of the Kyrgyz Republic (NBKR) has maintained its rate since December 2016 when it last lowered it as part of a 500-basis point easing cycle that began in March last year.
The central bank said inflation in Kyrgyzstan, which borders China to the east and Kazakhstan to the north, “remained at a moderate level” of 3.7 percent as of Dec. 15, down from 4.0 percent in November.
Against a backdrop of a recovery in world commodity prices and growing domestic demand, NBKR expects inflation to increase to within its target of 5-7 percent.
The country’s economy is continuing to recover, with real Gross Domestic Product growth in the January-November period of 4.0 percent, with industry output up 12.8 percent and a steady inflow of remittances supporting overall growth.
Excluding output from the Kumtor gold mine, national output grew 3.9 percent, the central bank said.
In the third quarter of this year GDP was up 5.0 percent year-on-year, down from 6.0 percent in the second quarter.
The exchange rate of the Kyrgyzstani som remains stable, the central bank said, adding it had carried out interventions in the first half of December to smooth out sharp fluctuations.
The som has been relatively stable since mid-2016, after falling sharply in 2014 and 2015 due to Russia’s economic crises.
Today the som was trading at 69.5 to the U.S. dollar, little changed from 69.2 at the start of the year.
Mid-December the International Monetary Fund completed its fifth review of Kyrgyzstan’s economy, saying it is showing signs of recovery with growth-friendly fiscal consolidation essential to rebuild buffers and reduce debt vulnerabilities.
Completion of the review allowed disbursement of almost $30 million, bringing total disbursements under the 2015 arrangement to about $80 million out of a total approved $92 million.
The IMF also said the central bank’s policy was “appropriately focused on maintaining price stability,” and the NBKR should continue to pursue a two-way flexible exchange rate policy and limit interventions only to smoothing out excessive volatility.
Authorities’ plan to transition to inflation targeting was also welcomed by the IMF, which added that progress was needed to amend the banking law and thus strengthen the NBKR’s independence and governance.
The IMF projected real GDP growth in Kyrgyzstan this year of 3.2 percent, down from 3.8 percent in 2016, 3.3 percent in 2018 and 4.9 percent in 2019. Non-gold GDP is seen up 3.3 percent this year, down from 3.7 percent last year, 3.8 percent in 2018 and 4.0 percent in 2019.
Inflation was seen averaging 3.1 percent this year, up from 0.4 percent in 2016, then 4.2 percent in 2018 and 5.0 percent in 2019 and following years until 2022.
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