Kazakhstan

After averaging 10% annual growth from 2000 to 2007, the GDP of Kazakhstan grew by 2.4% in 2008, which is much lower than the targeted goal of 6 to 7%. Industrial output grew by 2.1% in 2008, down from the 4.5% recorded in 2007. The mining and utilities sectors were leading drivers of growth in industrial production. The grain harvest of 2008 was not as favourable as in 2007, and overall agricultural production fell by 5.6% in 2008 compared with 2007. Oil and gas condensate production was expected to come to 70 million tons in 2008, 4.4% higher than in 2007.
Kazakhstan’s growth is expected to slow from an estimated 2.4% in 2008 to 1.5% in 2009, with decelerating inflation from 17.0% in 2008 to 8.5% in 2009.

Due to the rapid growth of hydrocarbon production and massive oil revenue, budget performance was strong in Kazakhstan. But the State budget of the economy was expected to record deficits of over 2.2% of GDP in 2008. Additional spending on social infrastructure could worsen the budget performances of the country in 2009. To cover additional social spending from the oil sector, Kazakhstan plans to introduce a new export tax on oil production, which will increase the tax burden on companies developing the country’s natural resources and mainly target foreign energy companies operating on a production-sharing basis.

Tight liquidity and high inflation were the key monetary policy concerns for Kazakhstan. Consumer price inflation reached 17.0% in 2008, the fastest rates since 2000. The national currency, the tenge, was stabilized by drawing on the National Bank’s reserves in the second half of 2007, when concerns over liquidity problems in the banking sector sparked higher local demand for foreign currency. In August 2008 the tenge was 4% stronger in nominal terms against the United States dollar than a year earlier. However, the tenge was expected to be devaluated in the beginning of 2009.

Kazakhstan’s 2007 current account deficit was expected to revert to a surplus of 4.7% of GDP in 2008. The merchandise trade surplus was expected to rise in response to strong demand for the country’s oil exports. High oil prices increased the trade surplus from $10 billion in the first nine months of 2007 to $28 billion in the corresponding period of 2008. In the first three quarters of 2008, exports from Kazakhstan rose by 66.1% to $56 billion, and imports grew by 18.3% to $28 billion. The Russian Federation remained the largest trading partner of Kazakhstan; China is an important supplier of consumer goods.

In November 2008 the Government announced a $17 billion action plan for 2009-2010 to stabilize the economy. The plan includes measures for financial sector stabilization, development of the real sector, support for small and medium-sized enterprises, development of the agro-industrial sector, and realization of industrial and infrastructural projects. A new tax code introduced in January 2009 envisaged the increase of the tax burden on companies developing the natural resources sector, with the aim of reducing taxes for companies operating in other sectors, and cut the rate of corporate profit tax.