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55th Congress of the European Regional Science Association: "World Renaissance: Changing roles for people and places", 25-28 August 2015, Lisbon, Portugal
The Kyrgyz Republic is a country with transition economy. Its growth performance is constantly one of the lowest compared to other CIS countries. Growth rates reduce due to strong political instability and high corruption level in the country. Despite being leading reformer in the region, the Kyrgyz Republic has not done enough to solve the key problems. The main objective of this paper is to identify the most problematic and binding constraints for economic growth in the Kyrgyz Republic. Growth Diagnostic approach proposed by Hausmann et al. (2005) is applied in order to identify the most binding constraints. The analysis is based on qualitative and quantitative data on economic indicators at national and international levels. The CIS countries such as Armenia, Azerbaijan, Georgia, Belarus, Kazakhstan, Moldova, Russia, Tajikistan, Turkmenistan and Uzbekistan were chosen as comparator group of countries. Data for this study were collected from the research, publications, reports of the National Bank of the Kyrgyz Republic, the National Statistical Committee of the Kyrgyz Republic as well as statistical data published by the World Bank, IMF?s World Economic Outlook, UNDATA, Economic Freedom network, Global economic Forum, the Heritage Foundation and etc.. Time period is from 2004 till 2013 years. The results of the study were used to identify the most problematic factors for economic growth of the country. The study indicates that the most binding constraints for economic growth in the Kyrgyz Republic are (a) widespread corruption, (b) weak property rights, (c) inefficient energy sector and (d) low quality of education system. The same results were confirmed by ADB studies that found corruption level is the highest compared to other CIS countries and it is the strongest obstacle for growth. Despite the fact that the Kyrgyz Republic is the second richest country in water resources, it faces number of problems such as low productivity, outdated equipment from Soviet Union era, shortage of qualified workers and low efficiency. Lack of qualified labor force and low quality of education system is also binding constraint for growth for The Kyrgyz Republic. The Kyrgyz Republic ranked the lowest in comparison with comparator countries on all indicators assessing the quality and quantity of educational system. This paper is organized as follows: section 2 provides literature review on Growth Diagnostic methodology, section 3 gives an overview of economic development of the Kyrgyz Republic, section 4 is an analytical part which provides analysis of the Kyrgyz Republic?s economy. The final part gives concluding remarks.
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