Kazakhstan, Central Asia’s largest economy, is banking on plans to diversify its oil-based economy to achieve stronger growth after a sluggish 1.2% rise forecast for this year, the government and parliament said on Wednesday.
The upper house of parliament approved a 2016-18 state budget on Wednesday that aims to narrow the fiscal gap to 1.6% of gross domestic product next year and to just 1% in 2018 from 3% of GDP this year, Reuters reported.
Economic growth is set to accelerate to 2.1% in 2016 and to 3.2% by 2020, the upper house said in a draft state budget note, distributed to deputies and based on government estimates.
Kazakhstan’s GDP growth, driven by oil and production of industrial metals, has slowed from 4.3% last year as world prices for these commodities tumbled.
Slowdown in China and recession in Russia, Kazakhstan’s major trading partners, are also dragging on the economy.
The government plans to achieve stronger growth in the coming years through large-scale infrastructure projects and diversification, Deputy National Economy Minister Marat Kusainov told the Senate. “(Their) contribution to economic growth is estimated at 1.1% annually,” he said.
Infrastructure projects include new roads and a logistics hub Kazakhstan is building on the Chinese border.
Export Duty
Kazakhstan’s budget has been calculated using an oil price of $40 per barrel for 2016-17 and $50 per barrel in 2018-20, he said. Brent crude traded at $45.75 per barrel on Wednesday.
On Jan. 1, the government will cut its export duty for crude oil to $40 per ton from $60 currently, the national economy ministry said in a written reply to a question from Reuters later on Wednesday.
The government expects industrial metals prices to rise by an average 2.4% per year in the next five years, Kusainov said.
Industrial production is forecast to rise by 0.4% in 2016 after declining 1.8% this year. Output growth is set to strengthen further to 4% by 2020.
Production of crude oil and gas condensate, the backbone of the Kazakh economy, is forecast to slide to 77 million tons in 2016 from this year’s 79 million tons. Oil output is set to reach 92 million tons in 2020.
Currency
On Aug. 20, the government and central bank allowed the national tenge currency to float freely.
The sharp depreciation of the tenge that followed has fuelled inflation which is forecast to reach 8-10% at the end of this year compared with 7.4% in 2014.
The government sees an annual inflation target of 6-8% in 2016-17, expecting consumer price growth to decrease further to 3-4% at year-end in 2020.
