The Kyrgyz Republic has recorded steady progress in poverty reduction and shared prosperity over the past twenty years. The government's national development program to 2040 sets a clear target for continued growth and improved living standards. The overarching theme of the Systematic Country Diagnostic (SCD) update is the need to improve the economic environment to create jobs and efficiently provide public goods and services while ensuring the efficiency of natural resources to build climate resilience, reduce vulnerability, and support green growth. The central goals of rising prosperity and falling poverty face three threats in the current international context: (i) slowing global growth and higher vulnerability to external shocks - disruptions to trade and transit, food, and energy price shocks that jeopardize the progress on fighting poverty, and climate shocks
(ii) a decline in competitiveness as relative productivity performance deteriorates because of poor opportunities for the private sector amidst dominant state owned enterprises (SOEs), large infrastructure gaps, and inadequate banking and capital markets
and (iii) institutional under-preparedness to address the new generation of complex development tasks and manage risks through long neglect, especially in public policy and governance, but also in capabilities to handle climate change risks. In this context, this report finds that the transition of the Kyrgyz economy to productivity driven growth is constrained by the following key issues: continued dependence on old drivers of growth
progress on poverty reduction and inclusion stalls, and the potential for further gains remains uncertain
little progress on institutional reforms and governance strengthening
and increased environmental risks, natural resource degradation, and vulnerabilities.