The ongoing war in Ukraine has significantly altered the trade structure of the Kyrgyz Republic, as highlighted in a recent report by the International Monetary Fund (IMF) on the country. The report indicates that China has become the main source of imports, while Russia has become the primary destination for exports, including re-exports, which are likely significantly underestimated in official trade statistics.
This increased geographical concentration, linked to a more fragmented global economy, could lead to significant long-term economic costs for the Kyrgyz Republic. Since the beginning of the war in Ukraine, the structure of the country's external trade has undergone substantial changes. Officially registered exports have decreased by 18 percent, while imports have increased by 76 percent compared to 2021, making the country's economy significantly more dependent on external trade.
Furthermore, trade is increasingly concentrated with two main trading partners. The share of imports from China has risen from 26 percent in 2021 to nearly 42 percent in 2022, well above the average historical figure of 22 percent observed from 2005 to 2018. At the same time, Russia has become an even more significant market for Kyrgyz exports. In 2022, almost 48 percent of Kyrgyzstan's total export volume went to the Russian Federation, significantly higher than the 14.3 percent in 2021 and the average historical figure of 14.1 percent.
In 2022, the Kyrgyz Republic's external balance of payments deteriorated sharply, mainly due to trade. The current account deficit increased to 43.6 percent of GDP from 8 percent the previous year, primarily driven by the trade balance deficit, which rose from 26.1 percent of GDP in 2021 to 58.5 percent in 2022.
Experts from the IMF noted that the dynamics of the current account and trade balance of the Kyrgyz Republic in 2022 sharply contrasted with similar indicators in the Caucasus and other Central Asian countries, which either moved to a surplus or significantly reduced their deficits.
