The Dual Economic Trajectory of Kyrgyzstan in the Shadow of the Ukraine War: Escalating Cost of Living and the Influx of Sanctions-Driven Capital

Abstract

The Russian invasion of Ukraine in 2022 and the subsequent Western sanctions have had a multifaceted impact on the economy of the Kyrgyz Republic, giving rise to two opposing economic vectors. This study analyzes this phenomenon: on the one hand, there is an escalation in the cost of living for the population, driven by an inflationary shock and volatility in remittances. On the other hand, the country has recorded anomalous GDP growth, fueled by geopolitical arbitrage, significant re-exports of goods to Russia, and an influx of sanctions-driven Russian capital. The paper assesses the sustainability of this growth and highlights the long-term structural risks associated with the high concentration of trade and financial flows, which jeopardizes Kyrgyzstan's economic sovereignty and increases its vulnerability to secondary sanctions.