WB Predicts Slow Growth for Kazakhstan

The World Bank released a report which predicts Kazakhstan’s economic growth will pick up slowly in the medium term, but highlights it will remain much lower than before 2014. The report adds real GDP rates will be around 3% in 2017-2019.

Last year, the nation’s economy suffered from a slowdown in global oil prices, as the nation has low domestic demand. Real GDP growth declined from 1.2% in 2015 to 1% in 2016, according to the World Bank, BNews reported.

Lower oil prices and oil output widened the current account deficit, however investments in oil and gas production pushed up inflows of net foreign direct investment. As a result, the National Bank was able to partially replenish its international reserves, which it had drawn down earlier to finance foreign exchange interventions, according to the report.

Domestic consumption continued to slow down due to devaluation of the national currency. The inflation rate reached 14.6%, which in turn weakened household purchasing power.

The Kazakh government sought to stimulate domestic demand and diversify the economy in 2016. Authorities postponed fiscal consolidation and used economic support measures financed by the oil fund and additional borrowing. The government used special national programs focused on increasing domestic demand through higher public wages and social transfers and continued subsidy provisions to national enterprises and small and medium-sized businesses. It also decided to support banking sector.

Authorities plan to recapitalize the country’s major banks. The National Bank started gradually easing its contractionary monetary policy as inflationary pressures subsided in the fourth quarter of 2016.

Experts predict oil prices will gradually recover and oil from the giant offshore Kashagan field will offset the observed declines in traditional oil output. As a result, export revenue will increase and positively impact Kazakhstan’s current account and fiscal balances.