NUR-SULTAN – Kazakhstan’s economic growth will probably shrink by three percent in 2020 for the first time since the late 1990s and will recover by 2.5 percent in 2021, said the World Bank in its latest “Kazakhstan Economic Update, Summer 2020: Navigating the Crisis” report.
The country’s economic update features a thorough analysis of the nation’s economic performance, macroeconomic policies, the impact of the COVID-19 pandemic, and projections on how Central Asia’s largest economy will buffer the potential long-term economic consequences stemming from the pandemic.
Despite 2.3 percent economic growth in the first quarter of 2020, Kazakhstan had to weather declining economic activity due to falling commodity prices and trade as well as COVID-19 measures. The economic slump became the largest for Kazakhstan in the past two decades.
“Consumer demand showed moderate growth at 1.2 percent, reflecting growing concerns over COVID-19 and the restriction measures. Investment is expected to ease into 1.0 percent annually, supported mostly by the on-going foreign direct investments into the oil and gas industry and residential construction,” said the report.
The report commends the country’s prompt actions to handle the outbreak, including the closure of borders and movement restrictions.
Nearly 4 million people, who lost jobs due to lockdown, out of the country’s 18 million population received financial assistance of 42,500 tenge (US$100) twice, while the state of the emergency was in effect, and will receive it again amid fresh restrictions. Almost one million people, low income and socially vulnerable people and people with disabilities, will receive food baskets and daily non-food essentials.
“The Kazakh government acted early to contain the spread of COVID-19. Following the announcement of a state of emergency, a state commission was set up to coordinate the efforts to fight the pandemic, impose quarantine control, and provide support to those whose livelihood was affected by the coronavirus or by the emergency restrictions. The authorities implemented a fiscal relief package to provide support to firms and households affected by the crisis,” said the report.
Such an effective and holistic approach should be continued and strengthened, noted World Bank experts, and said it is difficult to predict to what extent these measures will help shelter the economy. The report says more resources need to be allocated to improve access and quality of education and healthcare.
“Having a medium-term reform program can also help leverage resources from the private sector and better enable it to adjust and respond to new opportunities,” said the report.
Kazakhstan continued to receive positive net inflows of capital during the first quarter of 2020.
“Net foreign direct investment inflows amounted to $2.5 billion, or around 8 percent of GDP, throughout the first quarter of 2020 but at a slightly slower pace compared to the same quarter of last year. FDI in Q1-2020 was mainly driven by the implementation of activities and reinvestment of earnings in the mining sector. As Kazakh firms and the government reduced their foreign assets, the financial account recorded a net inflow of portfolio capital of $0.5 billion,” said the report.
While the risk of a prolonged global economic slowdown remains, Kazakhstan may benefit from taking the time to strengthen the effectiveness of public administration and services, including broader digitization of public services, improving tax administration and a mechanism to review and redeploy fiscal resources toward more efficient state programs. The report also noted that reforms in logistics, digital telecommunications and the financial sector could drive private sector growth.
Full report is available here.