Kazakh Economy Resilient to 2020 Shocks, Says Fitch Ratings Agency

NUR-SULTAN – At the end of 2020, Kazakhstan demonstrated a robust economic performance that supported the nation’s economy in addressing the 2020 shocks – coronavirus pandemic and oil price plunge, says the latest Fitch Ratings presentation on Kazakhstan. 

“Despite the country having the second-highest commodity export dependence in the ‘BBB’ rating category, its fiscal and external finance buffers remained robust at end-2020, supported by a strong global asset-market recovery and rally in gold prices,” said Fitch in a statement. 

Kazakhstan’s flexible exchange rate also made the nation’s economy more resilient to the oil price shocks in April 2020. Along with other OPEC+ nations, Kazakhstan committed back then to reducing its oil production in an effort to prop up falling prices and collapsed demand. 

With these oil cuts in place and pandemic restrictions, the country’s economy contracted by 2.6 percent in 2020. But more should be done to ensure the country is on a sustainable path towards recovery. 

“Kazakhstan’s recovery will face challenges, as it deals with a wave of new coronavirus infections. Vaccination is gathering pace, with a target of roughly 30 percent of the population by end-June 2021. If successful, this will aid in the easing of economic restrictions,” said the statement. 

Fitch experts forecast Kazakhstan will continue its strong fiscal and monetary policy stimulus in 2021 and expect Kazakh economic growth to rebound to 3.7 percent in 2021 assuming a recovery in oil prices, expansion of Kazakhstan’s major Tengiz project and the recent legislation that allowed citizens to withdraw pension savings. 

“The authorities are re-engaging with several key structural reforms that could improve the efficacy of monetary policy, countercyclicality of fiscal policy and rebuilding of fiscal buffers, as well as the transformation of the structure of the economy through privatisation, diversification and attraction of investments,” said Fitch experts. 

The vaccine rollout is accelerating worldwide, but the consequences of the pandemic are not going anywhere in the near future, according to the April macroeconomic report published by the Kazakh Applied Economics Research Center.

“The world’s economies are slowly beginning to recover, but no one has an estimate of the end of the pandemic. New strains and mutations of the virus, particularly the emergence of two mutations in India, are of big concern for many. All this continues to make economic prospects uncertain for 2021,” said the center’s report. 

The experts project the economic growth to reach 3.9 percent given that Brent crude oil trades at $62.3 per barrel, the economies of Kazakhstan’s trade partners grow 4.5 percent, and oil and gas condensate production reach 88.9 million barrels in 2021. 

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