Wires

Kyrgyz economy to rebound after 2012 growth slowdown - IMF

* Shaky economy to rebound in 2013-14 with higher goldoutput

* Calls to nationalise Kumtor rock the volatile nation * Fight against corruption key for public sector-led growth By Olga Dzyubenko

BISHKEK, Oct 10 (Reuters) - Kyrgyzstan's economic growth --hit by an output collapse at a flagship gold-mine -- is set toslow to just 1 percent this year, the International MonetaryFund (IMF) said on Wednesday.

But the IMF, which last year the approved a three-year,$103-million economic support package, also predicted amedium-term growth recovery.

Prudent fiscal and monetary policies will help keepinflation at 8 percent this year and 7.5 percent on average in2013-14, the IMF said, also stressing the need to fightcorruption and the funding of terrorism.

A mainly Muslim Central Asian nation of 5.5 million whichhosts both U.S. and Russian military air bases, Kyrgyzstan isone of the poorest former Soviet republics, whose per capita GDPis worth less than a tenth of that in next-door Kazakhstan.

The Fund is expected to approve the third review of theeconomy by the end of the year, making a new tranche of some $15million available to the country.

The Centerra-operated Kumtor gold mine -- thelargest gold venture run by a Western-based company in CentralAsia -- alone accounted for 12 percent of Kyrgyzstan's GDP andmore than a half of all exports in 2011.

Due to Kumtor's lower output, Kyrgyzstan's government inJune slashed its original 7.5-percent GDP growth forecast to amodest 1.8-percent rise. GDP expanded by 5.7 percent in 2011.

"This year has turned out to be challenging for the KyrgyzRepublic," Christian Beddies, head of the Fund's monitoringmission, told a news conference at the end of a visit.

"The economic situation is worse than expected becausegeological factors have led to the partial deferral of goldproduction by the largest mining company to 2013-14."

As a result, real GDP contracted by 4.6 percent year-on-yearover the first eight months of 2012, with non-gold growth of 3.9percent, he said.

"We expect real GDP to grow by about 1 percent this year andabout 6.5 percent over the medium term on the back of therecovery in gold production, growth in agriculture, trade andconstruction," he said.

INSTABILITY, CORRUPTION

Kyrgyzstan, which lies on a drug trafficking route out ofAfghanistan, remains volatile after two violent popular revoltstoppled two presidents since 2005. Some 500 people were killedin inter-ethnic riots in southern Kyrgyzstan in June 2010.

Last week, a court charged three opposition nationalistmembers of Kyrgyzstan's parliament with attempting to seizepower after they led a crowd of supporters to storm governmentheadquarters, demanding that Kumtor should be nationalised.

Nationalist outrage was sparked by assurances given byKyrgyzstan's new prime minister, Zhantoro Satybaldiyev, thatKumtor would not be nationalised.

Satybaldiyev, holding the post since Sept. 5, has pledged toalleviate widespread poverty and fight deep-rooted corruption.

The Fund "highlighted to the authorities the importance ofstrengthening the anti-money laundering and combating thefinancing of terrorism framework to bring it in line withinternational best practice", Beddies said.

Fighting corruption and improving the business climate musthelp support sustainable and inclusive private sector-ledgrowth, the Fund said, welcoming the adoption of a newanti-corruption law.

(Writing by Dmitry Solovyov; editing by Ron Askew)

((dmitry.solovyov@thomsonreuters.com))

Keywords: IMF KYRGYZSTAN/