ASTANA – The European Bank for Reconstruction and Development (EBRD) has released a new report on regional economic prospects for its countries of operation with the promising title “Return to modest growth.”
For Kazakhstan, the organisation projects 0.7 percent growth in 2016. Last year’s growth rate was 1.2 percent. Average annual inflation for 2016 can be expected to reach 14.8 percent.
“Monetary conditions in Kazakhstan have improved, the exchange rate has stabilised and inflation is on a downward trend, albeit from a high level (inflation decreased from 17.7 percent year-on-year in July 2016 to 16.6 percent in September),” said the report.
According to the EBRD, factors including low oil prices, subdued growth in Russia and economic challenges in China “continue to depress growth, which is exaggerated by the negative impact of regional risks and global and domestic security incidents on consumer, business and investor confidence.”
In the nearest future Kazakhstan will continue to rely on state support programmes, state-owned and quasi-state-owned enterprises to drive growth, states the report.
In 2017, the EBRD projects Kazakhstan’s growth to reach 2.4 per cent, as “the external environment improves, resulting in stronger exports of oil, higher foreign direct investment and increased investment domestically.” At the same time, inflation is expected to decline to 7.5 percent.
Growth in the Central Asian region in 2016 is expected to end up at 2.9 percent, down from 3.6 percent in 2015.
“Growth in Central Asia slowed down further in the first half of 2016, reflecting the region’s strong dependence on commodity exports and close economic ties with Russia. Nonperforming loans have been rising in several countries while fiscal pressures have increased,” the EBRD found.
“The build-up of structural challenges over 2014-16 arising from lower commodity prices, remittances and exports as well as declining local currencies, are increasingly depressing growth, creating fiscal pressures and increasing risks in the region, notwithstanding the fact that the external environment is beginning to normalise.”
The region also faces higher ratio of nonperforming loans, increases in fiscal pressures and continued strain on local currencies. The EBRD stressed the growing risk that economic or financial sector challenges can be spread across the region, even if economic links between most of the countries remain limited.
“The spillover risk, combined with the global and regional security incidents observed over 2016, are increasingly negatively affecting consumer, business and investor confidence in the region, including in the largest economy – Kazakhstan. In 2017, growth in the region is projected to increase to 3.9 percent, driven by a positive trend in commodity exporting countries; however, material downside risks to growth will remain,” the report predicts.
Currently, the EBRD operates in 37 countries, including six in Central Asia: Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan and Uzbekistan.
According to the new report, the outlook for the whole EBRD region has improved at its margin and has revealed a modest recovery of oil prices from the lows seen in the first quarter of 2016, which led to a stronger outlook in Russia and parts of Central Asia and the European Economic Community. Other trends include the partial recovery of capital flows into emerging markets in the aftermath of the U.K. Brexit referendum, as well as the fact that “weakness of global trade has persisted and the recovery in advanced economies has remained slow” and “geopolitical risks, both external and domestic, have remained elevated, with the situation in the Middle East and Eastern Ukraine being volatile.”