TOPIC OF THE WEEK: Kyrgyzstan’s early polls: Should investors flinch—or lean in?
One would be forgiven for fretting about the snap parliamentary vote in Kyrgyzstan on Nov 30th. In all of Central Asia, Kyrgyzstan has had the largest share of early votes (parliamentary and presidential), and those have often been associated with political crises and mass protests. In turn, my analysis suggests that this is closely correlated with the fact that Kyrgyzstan has the least authoritarian system of governance in the region as judged by The Economist's Index of Democracy, and this has allowed for a freer will of expression relative to neighboring countries.
I, however, claim that this time may very well be different as, going through the various reasons for the early vote, the most probable cause for the dissolution of the current parliament appears to be a strategic reset and control ahead of the more significant presidential elections. Ultimately, the move is aimed at reducing the opposition’s room for maneuver and at re-positioning the political field before the all-important 2027 presidential race. This explanation would better fit the broader trend of consolidating vertical power, restricting media and NGOs, and promoting control-driven legislation. Despite the fact that parliament’s formal powers and autonomy became narrower after the transition back to a presidential republic in 2021, the president probably would not like to take any chances, but rather ensure a fully pliant parliamentary body now.
Beyond that, a more prominent risk might derive from the latest sanctions package on Russia, including because of questions as to whether Kyrgyzstan (and other Central Asian countries) might face restrictions across energy/banks/manufacturing, etc.
Through it all, the economy hasn’t missed a beat. Economic growth has been very strong, expanding in excess of 9.0% since 2022, with investment remaining the key driver of the underlying momentum. This is providing additional impetus to construction, industry, and transport. The key risk remains the large CA deficit, although it has also declined materially since its 2022/2023 peaks. As a counterbalance, higher gold prices have significantly boosted FX reserves and improved FX reserve cover of imports.
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