Kazakhstan’s Economic Update is a 20th report that looks at recent economic developments, customers and political problems in Kazakhstan.
Download the full – Kazakhstan Economic Update, Summer 2020: Navigating the Crisis
The COVID-19 pandemic is the biggest surprise to the Kazakh economy in nearly two decades and is already having a very negative effect on growth. While the collapse in oil costs in 2009 and 2015 reduced aggregate demand and undermined the stability of the monetary sector, the existing crisis has meant that the source of the economy is also affected through a series of blockades. These measures, mandatory to involve the pandemic, are especially disruptive for corporations with physical presence and face-to-face transactions.
The Kazakh government acted early to involve the spread of COVID-19. Following the announcement of the state of emergency, a state commission was set up to coordinate pandemic control efforts, impose quarantine controls and provide others whose livelihoods have been affected by coronavirus or emergency restrictions.
The government has also brought a tax package to the businesses and families affected by the crisis. This effective technique for monitoring the pandemic and gaining better access to fitness facilities should be pursued and strengthened. But the deployment of resources and reforms are also needed to allow Kazakhstan to emerge from the crisis.
The government may want to reallocate some resources from public systems to access greater education and physical care, and to temporarily assist staff and employers. A medium-term reform timetable can also help mobilize personal sector resources and enable it to adapt and respond to new opportunities.
The effect of fiscal and financial stimulus on the recovery will be tested through a prolonged pandemic and a prolonged slowdown in the global economy. Disruption of source chains and unresolved tensions in the global industry can further complicate the source of inputs.
The plan can only repair economic expansion after the pandemic has withdrawn. As a result, GDP is expected to contract to 3% by 2020 and only modestly up to 2.5% in 2021.
Inflationary stress is expected to persist until the end of 2020, but will slow as the effect of exchange rate depreciation dissipates. Inflation will remain above the central bank’s 6% target this year, following the depreciation of the tenge.
The existing account deficit is expected to widen to more than 5% of GDP by 2020, largely due to industry deterioration and declining oil export volumes.
A protracted crisis will most likely contribute to increasing poverty and inequality in Kazakhstan. Preliminary estimates recommend that the poverty rate simply rise in 2020 from 8.3 cent to 12.7 consistent with a penny, to more than 800,000 more people living in poverty.
The surprise for Kazakhstan’s labour market, caused by the pandemic and mitigation measures, has serious employment consequences, mainly in sectors employing low-skilled workers. Unequal access to quality education, especially during containment, can have a negative effect on the progression of human capital for the poor.
Learn more: Download the full report. The report will also be available in: Kazakh, Russian.
Press release: COVID-19’s surprise in Kazakhstan’s economy is in two decades, a new World Bank report says (22 July 2020)
Previous updates for Kazakhstan
World Bank in Kazakhstan