Kazakhstan’s economy recovering from the COVID pandemic and oil market shock, says IMF
An International Monetary Fund (IMF) mission, led by Nicolas Blancher, summed up their main conclusions and recommendations to the government of Kazakhstan during their consultations from November 4 to November 17 in Almaty and Nur Sultan, reports Strategy2050.kz.
IMF mission said that Kazakhstan’s economy shows signs of recovery from the consequences of the COVID-19 outbreak and low prices for oil.
“In 2020, output contracted for the first time in over 20 years—by 2.5 percent—due to reduced oil production and domestic activity. The turnaround that began in late 2020 has fostered real GDP growth in 2021 of 3.5 percent through October, returning output to its pre-Covid level,” said IMF in a concluding statement published on the official website.
Inflation stood at 8.9 percent in October driven mostly by food prices, while labor market and poverty indicators have remained resilient throughout the pandemic, with unemployment stable at about 5 percent.
The timely response of the Kazakh government was crucial in offsetting the impact of these combined shocks. Among those policy measures noted by IMF were regulating prices for socially important goods, cash transfers to vulnerable households, and targeted assistance to hard-hit sectors and small and medium-sized enterprises, including subsidized lending and tax exemptions.
“Projects under the Employment Roadmap program helped support employment. After raising the policy rate in early 2020, the National Bank of Kazakhstan maintained an accommodative monetary policy. The authorities also eased regulatory and prudential requirements for banks, while encouraging them to grant loan repayment deferrals to eligible borrowers,” said IMF experts.
They forecast the recovery to continue with growth expected to reach 3.7 percent in 2021.
Inflation, however, may increase due to “strong domestic demand and global supply disruptions” but should gradually taper to the corridor set by the National Bank.
“The main risks to this outlook are lower-than-expected vaccination rates, slower growth of trading partners, lower oil prices, and persistent inflationary pressure, which could require further monetary policy tightening. By contrast, higher-than-expected oil prices would be an upside and strengthen buffers against shocks,” said IMF.
As Kazakhstan is committed to transitioning to a low carbon economy by 2060, it will require new approaches in doing so. The current development model that is based on natural resources will not be sustainable, according to IMF.
The recently announced ten national projects that are designed to introduce structural reforms and meet the need of the growing economy can support Kazakhstan on its path towards a low carbon future.
“New sources of growth and job creation, driven by the private sector, will depend critically on the pace of structural reforms to make the economy more market-based and to manage the impact of climate change. (…) Given the multiplicity of challenges and needed actions, reform prioritization will be essential,” they said.