World Economy

Kazakh Outlook Gloomy

Kazakh Outlook GloomyKazakh Outlook Gloomy

Astana is slashing growth forecasts and cutting spending as Kazakhstan eyes its gloomiest economic outlook for years, sources in parliament report.

 The government intends to cut this year’s GDP growth forecast to 1.5 percent (against its previous forecast of 4.8 percent) and reduce budget spending by a whopping $7 billion, sources in the ruling Nur Otan party told following a presentation to parliament by National Economy Minister Yerbolat Dosayev, Eurasianet reported.

Such growth would represent a significant slowdown on last year’s 4.3 percent, and would be Kazakhstan’s lowest since 2009, the height of the global credit crunch.

As President Nursultan Nazarbayev acknowledged last week, Kazakhstan is facing a litany of economic problems, from low prices for oil and metallurgical output to the knock-on effect of Western sanctions against Russia and pressures on Kazakh currency, tenge, as a result of the ruble’s precipitous fall.

The government is cutting the oil price on which its budget is based from $80 to $50 in its revised budget (which will have to be approved by parliament), Dosayev said, after global prices dipped below $50 this month.

 The slump in international prices is a major headache in Kazakhstan, where oil accounts for 25 percent of GDP and 60 percent of the balance of payments.

Meanwhile, the fall in value of the Russian ruble continues to exert pressure on Kazakhstan’s tenge, causing fears of an impending devaluation, which the National Bank insistently denies. There will be no “sharp fluctuations” of the currency in 2015, its chairman, Kayrat Kelimbetov, promised on January 15. But he made similar pledges before last year’s devaluation, and analysts remain convinced that economic logic dictates that another is only a matter of time.