COVID-19 pandemic remains main trigger for global economy, say experts

27 May, 2021 18:32

Since the outbreak of the coronavirus pandemic, it has remained as the main trigger for the global economy, said experts from the Applied Economic Research Center in their latest macroeconomic review, reports Strategy2050.kz.

The AERC publishes macroeconomic reviews monthly adjusting their forecast.

In their April report, experts forecast Kazakhstan’s economic growth to reach 3.9 percent based on several assumptions, including Brent oil price to stand at US$62.3 per barrel, economies of the trade partners to grow by 4.5 percent, and the volume of oil and gas condensate production to reach 88.9 million tons in 2021.

“The economies of the countries started to recover gradually, but no one can estimate when the pandemic ends. Everyone is kept in suspense with new strains and mutations of the virus, in particular, the emergence of two mutations of the coronavirus in India. It continues to introduce uncertainty regarding the economic prospects, and in 2021 the states, population and business are forced to adapt to rapidly changing conditions,” said experts in the report.

The pandemic, however, produced positive and negative externalities. It forced hundreds of businesses to suspend their work and results in job losses, but there is another important outcome - the overflow of resources to new sectors and growing dominance of online learning.

Global outlook

International financial institutions also project the year of 2021 to usher in a post-pandemic recovery period. In March, the International Monetary Fund forecasted a six percent growth of the global economy in 2021 and 4.4 percent in 2022.

In January, the World Bank released its forecast of 4 percent for 2021 and 3.8 percent for 2022.

But globally economic recovery might be uneven depending on vaccine rollout.

“However, vaccination is proceeding disproportionately: high-income countries are more vaccinated than the low-income ones, as well as there is still uncertainty about its long-term effectiveness,” said experts.

Oil prices

Oil prices exert a heavy influence on Kazakh tenge. Last year in April, Kazakhstan agreed to oil cuts as part of the OPEC+ agreement that resulted in a record large 10 percent global oil cut.

In March, Kazakhstan and Russia were allowed to moderately increase their production, unlike other members of the agreement, by 20,000 barrels per day and 130,000 barrels per day, respectively, in April.

“According to the IEA forecast, in 2021, the average price of Brent oil will be 62.3 US dollars per barrel, which should reflect the positive results of vaccination with an increase in oil production by OPEC+ countries. AERC uses this price level for Brent crude in the forecast for 2021,” said the report.

AERC projections

Experts also noted that Kazakhstan’s economy will continue to be affected by fiscal stimuli and soft monetary conditions. This, however, might result in risks for the real estate market, where prices in the primary housing market increased by 4.7 percent in the first three months of this year and 10.4 percent in the secondary housing market.

The rising prices are due to the recent decree that allowed the citizens of Kazakhstan to withdraw part of their pension savings.