While just years ago Kyrgyzstan was leading the pack in the former USSR in terms of increasing gross domestic product and industrial productivity, the country now stands at the very bottom of the list, with Kazakhstan having all but fully recovered by the financial setback caused by the 60 per cent slump in oil prices back in 2014. It strongly suggests that cheap oil remains at the expense of its net exporters, while net buyers, especially those with weak purchasing powers, suffer when oil prices are going through the roof again. This, however, is not without the risk of a backlash, since constraints in demand are most likely to become a liability for those who produce it in abundance.
According to data made available by the Interstate Statistics Committee of the Commonwealth of Independent States, which unites all former Soviet republics except Georgia and the three Baltic states, Kyrgyzstan, like Kazakhstan a member of the Eurasian Economic Union (EAEU), posted an overall economic growth of no more than 0.7 per cent year-on-year in the first five months of the current year, along with a net decline in industrial output of 3.3 per cent on-year.
Other EAEU member states Russia, Kazakhstan, Belarus and Armenia posted 1.3, 4.1, 4.7 and 9.6 increase in GDP respectively in the first quarter of this year in comparison to the same period of 2017. In the first five months, their industrial outputs show respective on-year increases of 3.2, 5.4, 8.3 and 3.3 per cent. GDP growth in the first quarter for non-EAEU states Uzbekistan, Tajikistan and Turkmenistan stood at 5.1, 7 and 6.2 per cent respectively. Uzbekistan posted 10.8 and Tajikistan 11.8 per cent on-year in industrial output increase in the first five month of the year.
Short-term indicators for both Kyrgyzstan and Kazakhstan point in the wrong direction. From April to May this year, the former’s industrial output dropped by 5.3 per cent, while domestic retail trade, a good indicator for domestic spending, increased to the same proportion. In Kazakhstan these indicators stood at -2.9 and +10.1 per cent respectively. It means that both nations are spending more than their productivity justifies. Russia in this regard shows better discipline, with an increase of 2.4 per cent on-year in retail trade through the first five months against industrial growth of 3.2 per cent.
Overall, the domestic economies under review show other varying, though equally related, trends. Kyrgyzstan’s consumer price index over the first five months increased by 1 per cent on-year, as compared with 1.6 per cent in the Russian Federation, 2.4 per cent in Kazakhstan and 6.6 per cent in Uzbekistan. Kyrgyzstan’s industrial production costs over the period rose by 1.9 per cent on-year, Kazakhstan’s by 5 per cent and Russia’s by 5.5 per cent.
The overall trend points in the direction of a gradual improvement of national purchasing powers, caused by increased incomes. These, in turn, trigger increases in industrial production costs since the latter largely consist of wages payable. Such domestic economic conditions matter all the more at times international trade, on which virtually all CIS states depend, with varying success, for their economic development, is under pressure from political sides, including so-called trade wars and so-called sanctions.
By Charles van der Leeuw, based on latest data by the CIS Interstate Statistics Committee.
