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Kyrgyzstan's consumer prices stand at 14% y-o-y

posted onSeptember 20, 2021

Kyrgyzstan’s annual inflation rate stood at 14 percent in August, from 14.6 percent in the previous month which was the highest inflation rate since August of 2011, amid lower pressure from prices of food & non-alcoholic beverages (21.4 percent vs 23.4 percent in July) and housing & utilities (5.7 percent vs 5.9 percent), data published by the country's national statistics body showed.

On the other hand, inflation picked up for transport (22.2 percent vs 20.3 percent), health (16.5 percent vs 7.4 percent), alcoholic beverages & tobacco (10.5 percent vs 9.6 percent), household items &
appliances (7.7 percent vs 7.2 percent), and miscellaneous goods & services (7.1 percent vs 6.8 percent).

On a monthly basis, consumer prices inched down 0.7 percent, after a 0.2 percent downtick in July.
Consumer prices averaged 11.7% in the first eight months of this year, according to the figures, up from an average of 5.6% recorded in the same period in 2020.

Earlier this month, the National Bank of Kyrgyz Republic kept its benchmark interest at 7.5 percent, after a 100bps hikes in the previous meeting. Rate-setters said that the current level was consistent with efforts to support the economy, amid rising inflation pressures.

Policymakers added that they will continue to regularly assess the impact of external and internal factors on inflation and takes appropriate monetary policy measures depending on the economic situation.

The economy shrunk by 9.40 percent in the first quarter of 2021 over the same quarter of the previous year.  In January - July 2021 period, the GDP contracted by 1.6 percent from a year earlier.

In August, the IMF released around USD 240 million to Kyrgyzstan as part of its SDR allocations, which should boost FX reserves.

According to the IMF, growth is expected to rebound in 2021–22. The economy is projected to grow by 3.8 percent in 2021 and by 6.4 percent in 2022, underpinned by the more favorable global outlook, higher gold production, and a gradual rebound in tourism, transportation and related services.

Annual inflation will remain elevated in the coming months but gradually return to the central bank’s target range of 5–7 percent. The current account deficit is projected at about 6 percent of GDP in 2021 and in the medium term, driven by a recovery in imports and the opening of the borders.

The level of uncertainty, however, remains high. Lower gold prices or weaker remittances could weaken the balance of payments. More depreciation due to external pressures would further raise public debt while financing constraints could limit fiscal room for countercyclical policies. with macroeconomic buffers largely exhausted in 2020, policymakers will face tighter constraints with less room for policy flexibility, the Washington-based lender said.

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