Kazakhstan needs to focus on delivering reforms for inclusive economic recovery and higher productivity to ensure a full recovery from the impact of the Covid-19 pandemic.
Kazakhstan’s economy is expected to grow modestly by 2.5 per cent in 2021 and support higher growth by 3.5 per cent in 2022, but significant downside risks remain due to uneven worldwide economic recovery and higher debt-related risks on the global financial market, according to the World Bank’s latest Kazakhstan Economic Update.
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World Bank experts say that 2020 was the most challenging year for Kazakhstan’s economy in the last two decades. The fallout of the Covid-19 pandemic has hit the economy harder than the crises in 2008 and 2015. The spread of the pandemic halted global activity in the second quarter of 2020 and depressed global demand and price of oil, which is Kazakhstan’s main export commodity. The pandemic also significantly depressed domestic economic activities, with the national economy projected to shrink by 2.5 per cent in 2020.
“The economy is expected to grow modestly in 2021 based on an improved global economic outlook, higher demand for exports, resumption of domestic economic activities, and higher disposable income,” says Sjamsu Rahardja, senior economist, World Bank Country Office in Kazakhstan. “The risks to the economy are on the downside. However, smooth implementation of Covid-19 vaccinations and continuation of the economic reforms are important for sustaining growth.”
Experts highlight that the depressed economy will hit the most vulnerable worst.
The pandemic has severely impacted the retail, hospitality, wholesale, and transport sectors, which account for around 30 per cent of employment in the country’s cities: however, the country’s rural population will experience the strongest shock.
According to World Bank estimates, Kazakhstan’s poverty rate will increase to 12-14 per cent in 2020 from a baseline of six per cent in 2016.
“The most significant increase in the number of the poor is expected to come from rural areas, which threatens to increase inequality in Kazakhstan,” says Jean-Francois Marteau, World Bank country manager for Kazakhstan.
“The country’s average GDP growth has declined after each economic crisis, weighed down by the lackluster productivity growth and over-dependency on hydrocarbons. Therefore, more than ever, Kazakhstan needs to focus on delivering reforms for inclusive economic recovery and higher productivity, as well as ensuring the effectiveness of government programmes.”
Some room for optimism
At the same time, the chairperson of the NAC Analytica corporate fund, Aktoty Aitzhanova, is more optimistic on growth projections, saying that, “given the assumption on oil price and world trade, the real GDP of Kazakhstan is expected to contract 2.5 per cent in 2020 before recovering by four per cent in 2021. Domestic output is expected to reach its pre-pandemic level in quarter three of 2021.”
The Kazakhstan authorities have implemented strong policy measures to minimise the pandemic’s impact on people and the economy.
However, Olzhas Khudaibergenov, founder and senior partner of the Center for Strategic Initiatives (CSI) highlights that, “measures to support the Kazakh economy during the pandemic should not be short-term. They should assume that the pandemic will have an impact for another two-three years.”
All experts agree however on the urgency of addressing the long-standing problems that diminish productivity growth, and strengthening the quality of social measures to protect the most vulnerable in Kazakhstan.
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