ASTANA – The Government and the National Bank of Kazakhstan will seek to achieve real economic growth in the country of 4-5 percent next year, the two organisations said in a joint communiqué on major directions of economic policy for 2015 published on Dec. 24.
The document reviews economic situation in Kazakhstan in 2014, underlining negative effects of aggravating economic conditions in the world and outlining plans on fighting consequences of their influence in 2015.
The general slowdown of economic growth and increasing geopolitical instability caused by the conflict in Ukraine and consequent introduction of reciprocal sanctions by the United States and the European Union on the one hand and Russia on the other hand, resulted in destabilisation of macroeconomic situation, the communiqué stated.
Accelerating growth of the gross domestic product (GDP) in the United States and the completion of the thirdround of the Federal Reserve’s quantitative easing programme led to the strengthening of the U.S. dollar and rising interest rates, which, along with the increase in the extraction of shale oil in the U.S., resulted in the decrease of the world price for Brent crude oil by 45.2 percent, from $115 per barrel at the end of June 2014 to $63 per barrel on Dec. 22.
Kazakhstan’s economy grew 4.2 percent during January-November, the document said. In January-October, its foreign trade turnover decreased by 8.3 percent compared to the same period in 2013. Due to the fall in world prices for oil and base metals and decrease in the volume of exports of oil, coal, ferroalloys, copper and aluminium, Kazakhstan’s commodity exports decreased by 4.9 percent. Imports of goods decreased by 14.5 percent due to the reduction in imports of machinery and equipment, chemical products and food products.
According to the statement, in 2015, Kazakhstan’s economic policy will be aimed at mitigating the effects of external factors to ensure social and economic stability in the country.
The communiqué highlights three main directions, including conducting countercyclical economic policy through the implementation of the state programme of infrastructure development Nurly Zhol for 2015-2019, increasing the competitiveness of Kazakhstan’s economy and supporting small and medium-sized enterprises (SMEs). The priorities also include maintaining macroeconomic stability and ensuring financial stability through strengthening the financial system and the recovery of the banking sector.
Elaborating on the countercyclicaleconomic policy, the document sets the goal of achieving real economic growth of 4-5 percent next year. To support economicgrowth and employment in2014-2015,at the instructions ofPresident Nursultan Nazarbayev, the Government has already allocatedone trilliontenge (US$5.5 billion) from the National Fundof Kazakhstan in February2014.
The second tranchein the amount of 500billion tenge ($2.75 billion) will be allocated foradditional concessionallending to small, medium and large businesses, rehabilitationof the banking sector and construction of infrastructure forfree economic zones and the international specialised exhibition EXPO 2017. The Government will also be allocating $3 billion annually from the National Fund to implement the new economic policyNurlyZhol, which envisions further structural reforms of the economy.
To further support business activities in the country, the government will be allocating 100 billion tenge ($550 million) from the National Fund annually in 2015-2016 for lending to small, medium and large businesses through existing programmes of interbank lending of the Damu Entrepreneurship Development Fund and the Development Bank of Kazakhstan.
Kazakhstan will also launch projects in the field of SMEs, modernisation of housing and communal services, road construction, development of electric power, renewable energy, and implementing institutional reforms in the amount of $13.5 billion, with $9 billion expected to be financed by international financial institutions.
SMEs will also receive support within the Business Road Map 2020, including the expansion of leasing operation and financial support for agriculture in the framework of the Agribusiness 2020 programme.
To support the positive foreign trade balance and exports, the communiqué previews developing mechanisms for trade and export financing at rates not exceeding the rates applicable for exporters to the EU (2-3 percent in foreign currency).
The start of the implementation of a new five-year plan of the State Programme of Accelerated Industrial and Innovative Development (SPAIID) is also of great importance while considering main economic goals of 2015. The second five-year plan, which launches on Jan. 1, 2015, will focus on developing manufacturing industry in certain priority sectors, taking into account regional peculiarities.
The communiqué stated that macroeconomic stability will be achieved through coordinating monetary and fiscal policy and curbing inflation in the planned corridor of 6-8 percent.
Inflation targeting is expected to increase the real yield savings in tenge, while lowering inflation expectations.
To prevent sharp exchange rate fluctuations for the national currency, measures to limit speculation in the foreign exchange market will be taken. In 2015, the National Bank jointly with the Government will work to amend the legislation increasing requirements for exchange offices in cash foreign exchange market.
To reduce the burden on the state budget, the Government plans to attract external loans from international financial institutions and use mechanisms of public-private partnerships for co-financing infrastructure projects.
Financial stability will be maintained by complex regulatory measures aimed at increasing the role of the national currency in the economy, stimulating the growth of tenge liquidity of banks to further increase lending for the economy and recovery of the banking sector.
To enhance the role of the national currency, the communiqué previews increasing guaranteed payout to depositors of Kazakhstan Deposit Insurance Fund on deposits in tenge from the current amount of 5 million tenge to 10 million tenge (US$27,000 to US$55,000). This will be achieved by increasing the fund’s capitalisation, reducing the interest rate on guaranteed deposits in dollars from 4 percent to 3 percent per annum and prohibiting the practice of setting the prices for goods and services in foreign currencies, primarily the U.S. dollar.
To stimulate the growth of tenge liquidity of banks, a temporary reduction of certain provisions of the prudential regulation where necessary will be considered.
To ensure recovery of the banking sector the authorised capital of the Problem Loan Fund will be increased by 250 billion tenge (US$1.375 billion), while mechanisms to work with troubled assets, including the organisation’s activities to manage non-performing assets and tax issues (tax administration), will get priority.
In the field of regulatory policy, Basel III. new standards for capital adequacy of banks, will be gradually introduced, which set softer requirements for banks in terms of capital adequacy and capital components the first stage of transitioning. The National Bank will monitor the implementation of the new capital adequacy given the current economic situation.
In general, the economic policy for 2015 will be aimed at mitigating the effects of negative external factors and, strengthening the stability of the socio-economic situation in the country. The main goals are to address recovery of the financial sector, maintain macroeconomic stability and competitiveness of Kazakhstan’s economy through diversification of the economy, the communiqué concluded.