World Bank Warns Kyrgyzstan's Economy Faces Risk of Stagnation

The World Bank has released a new report on the economic development of Kyrgyzstan and the wider Central Asian region.

While the report highlights steady growth in Kyrgyzstan’s economy, it cautions that this growth is not enough to advance the country to the next level of development, The Caspian Post reports citing foreign media.

The report, prepared in collaboration with the Kyrgyz Ministry of Economy and Commerce, outlines a three-stage approach to advancing the national economy. According to David Knight, a leading economist at the World Bank, Kyrgyzstan should prioritize investment, the adoption of new technologies, and innovation. The World Bank also recommends that the government focus on improving education, strengthening the private sector, and reforming energy policy.

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“Kyrgyzstan’s economy is currently showing strong indicators. However, these are not enough to facilitate a transition to the next level of development. As experience shows, it is only a matter of time before economic growth slows. The key question is whether the authorities can sustain momentum,” Knight said.

Ivaylo Izvorski, the World Bank’s Chief Economist for Europe and Central Asia, told The Times of Central Asia that Kyrgyzstan needs targeted investments - or “point injections” - in key sectors, particularly industry and energy.

“Why is it so difficult to transition from middle-income to high-income status? One reason is that countries cannot simply shift from investment-driven growth to innovation-driven growth overnight. The right technologies must first be introduced into the economy, and only then can innovation take hold,” Izvorski explained.

The World Bank has also raised concerns about Kyrgyzstan’s energy sector, particularly its pricing policies. Despite recent increases in electricity and heating costs, World Bank experts argue that tariffs remain artificially low and heavily subsidized, which could hinder long-term development.

“If electricity costs 10 cents per unit but consumers pay only 3 cents, it leads to waste and inefficiencies. State subsidies, the monopoly of state-owned enterprises, and market distortions continue to obstruct energy sector reforms,” Izvorski said.

The report also highlighted the need for education reform. The World Bank advises Kyrgyz authorities to raise educational standards, particularly in higher education, to support a more skilled workforce. To achieve this, universities and vocational schools should strengthen partnerships with industrial enterprises, while university funding should be tied to institutional performance.