Nonetheless, the economy is expected to expand in 2013.

According to data available for the first 9 months of 2012, inflation rate was 4.3% while earlier this year it was only 3.1%. Prices for the most sensible items for the population – bread, meat, milk – rose significantly. Zair Chokoyev explained this food price hike by stating: “There was a drought in the leading exporters of grain – the U.S.A. and Russia. This of course affected commodities prices.”

An International Monetary Fund (IMF) team, led by Mr. Christian Beddies, visited Bishkek September 26-October 10, 2012 to hold discussions for the third review under a three-year, SDR 66.6 million (US $106 million) Extended Credit Facility arrangement with the Kyrgyz Republic. In a statement at the conclusion of the visit, Mr. Beddies declared:

This year has turned out to be challenging for the Kyrgyz Republic. The economic situation is worse than expected because geological factors have led to the partial deferral of gold production by the largest mining company to 2013-14. As a result, real GDP contracted by 4.6% year-on-year over the first eight months of 2012 with non-gold growth at 3.9%. Headline inflation has dropped significantly to 2.1% at end-August year-on-year and is expected to remain in single digits despite the recent rise in international food prices. Following the break-up of the coalition government in August, the swift appointment of a new cabinet limited the period of political uncertainty and ensured that the impact on economic policy making was limited.

Looking ahead, we expect real GDP to grow by about 1% this year and about 6.5% over the medium term on the back of the recovery in gold production, growth in agriculture, trade and construction, particularly if prices for key exports remain high, and regional partners continue to grow. The mission welcomes the central bank’s continued commitment to implement policies that will keep inflation at bay and barring exogenous shocks expects inflation to stabilize at about 7% over the medium term.