In the Kyrgyz Republic, there is a troubling expansion of the shadow economy, which is developing faster than the legal business. By the end of 2024, the total volume of the "shadow" sector reached 308 billion soms, which accounts for almost 20% of the country's total GDP. According to the latest data from the National Statistical Committee, a significant portion of hidden turnover relates to informal activities, the share of which in the economic structure increased to 15.7% over the year.
Statistics show diverse trends within the shadow sector itself. While the share of the hidden economy slightly decreased over the year, the scale of unaccounted activity, on the contrary, increased. Interestingly, the growth rates of this segment outpace the overall economic indicators of the country. The official GDP of Kyrgyzstan increased by 11.5% last year, while the shadow sector showed growth of 12.9%. This highlights that a significant portion of the added value created in the country continues to remain outside of tax control.
The most challenging situation is in the service sector, where the gray business accounts for almost 70% of all operations in this industry. High risks are also observed in trade, transport maintenance, the hospitality industry, and transportation services. Shadow schemes maintain their resilience even in capital-intensive industries. In particular, in construction and manufacturing, the share of informal activity fluctuates between 20% and 22%.
This imbalanced development of the economy indicates the presence of serious structural barriers to conducting legal business. Many entrepreneurs choose informal activities to reduce their tax burden and avoid administrative pressure. The rapid expansion of the shadow sector not only reduces revenues to the state budget but also creates conditions for unfair competition. In the long term, this limits the financial capabilities of the state in implementing social initiatives and large infrastructure projects.
