Briefing Notes for the Launch in Almaty, 6 May 2010
Impact of the crisis
- Kazakhstan as one out of five net exporters of fuel in this subregion with an economy highly dependent on oil revenues, was impacted heavily by the crisis and the lower oil and other commodity prices. In 2007, the economy had grown by 8.9% and in 2008 by 3.3%, but in 2009 it was expected to grow by only 1%.
- The economy experienced a deceleration in the pace of decline in industrial production, which was the first sign that the government’s stimulus package, was having a positive effect.
- After having experienced the highest inflation rates seen in recent years in 2008 (17%), inflation decelerated to 7.3 % in 2009, the product of weaker domestic demand and lower commodity prices, particularly oil and food products.
- The current account balance turned negative in Kazakhstan and the economy was expected to experience a current-account deficit of 1.9% of GDP in 2009 compared with a surplus of 5.3% of GDP recorded in 2008. The merchandise exports fell by 39.3% and imports fell by 25.0% in 2009. As a result, the trade surplus declined from US$33 billion in 2008 to about $15 billion in 2009.
- The fiscal stimulus package has been significant, it accounted for up to 15% of GDP.
- The government responded with this stimulus package which included funds for projects in industry and infrastructure and special lending facilities for small and medium-scale enterprises. This seems to have had some impact, as the pace of decline in industrial production now seems to have slowed.
- The Government put social policy actions as a priority and increased its contributions to social assistance, social insurance, protection of essential social services and expanding nutrition programmes, to help the poorest segments of society deal with the fallout of the economic crisis.
- Kazakhstan was hit hard by the international crisis in liquidity owing to high growth of credits financed from foreign banks in 2008. Liquidity problems in the banking sector sparked higher demand for foreign currency among the population of Kazakhstan. The Government intervened quickly to stabilize the banking sector slowdown in credit growth. There was also a concern that tight credit markets could dampen growth in the non-oil economy, thereby jeopardising the government’s diversification targets identified by the development strategy entitled “Kazakhstan 2030”.
Outlook and policy challenges
- Positive economic growth forecast at 2% is expected to resume in Kazakhstan in 2010 owing to continued strong investment into oil sector projects, higher price for hydrocarbons and metals, and the positive results of the stimulus package.
- Inflationary pressure is expected to increase as economic activity picks up and capital inflows accelerate and this could intensify pressure on currency to appreciate.
- Unemployment continued to decrease from 583,100 in the first quarter of 2009 to 531,800 in the fourth quarter. The number of unemployment in February 2010 slightly increased to 552,000 but the gradual economic recovery is expected to entail moderate employment growth as capacity utilization is low in most sectors.