AKIPRESS.COM - Inflation in Kyrgyzstan is forecast to return to 5.0% in 2017 because import tariffs must rise to the Eurasian Economic Union mandates, and then ease to 4.0% in 2018 with limited additional adjustment in tariffs, the  Asian Development Bank's (ADB) report says.

Inflation could be higher if further depreciation of the Kazakh and Russian Federation currencies causes the som to weaken. If prices rise as projected, the central bank will likely raise interest rates over the next few years. It will likely maintain a flexible exchange rate policy, intervening less often to smooth exchange rate volatility, the ADB said in its Asian Development Outlook 2017.

The fiscal deficit is projected to narrow to the equivalent of 3.0% of GDP in 2017 and 2.5% in 2018 as the government strives to restrain expenditure, despite a presidential election in November 2017, and to boost revenue by reforming tax policy and administration, the Bank said.

Tax receipts could be higher if EEU accession yields more customs revenue than now forecast. The current account deficit is forecast to widen to 13.0% in 2017 and 13.5% in 2018, reflecting some improvement in trade with the EEU and signifi cantly lower exports to countries outside the EEU, notably the
People’s Republic of China (PRC) (Figure 3.5.7).