ASTANA (TCA) — Kazakhstan continues to withstand challenges related to lower oil prices and slower growth in Russia, China and Europe. The Kazakh authorities’ response—targeted fiscal support, exchange rate adjustment, strengthened domestic liquidity management, and structural reforms focusing on the business climate and public administration—has helped stabilize conditions, the International Monetary Fund (IMF) mission said in a statement at the end of its official staff visit to Kazakhstan on February 8.
While growth slowed in Kazakhstan in 2016, a pickup is expected in 2017. Medium-term prospects are subdued, however, due to continued lower oil prices and weak conditions in key trading partners. Policies should continue to address these conditions, the statement said.
Growth in 2016 was positive, 1 percent, reflecting an increase in oil production and supportive policies, notably Nurly Zhol, which provided funding for infrastructure, SMEs, and housing. Actions of Kazakhstan’s National Bank (NBK) stabilized markets and restored confidence in the tenge. Inflation came down during the year, and NBK reserves increased by $2 billion, owing to strong financial inflows.
Growth is expected to pick up in 2017 and over the medium term. Growth is projected to reach 2.5 percent in 2017 and non-oil growth should reach 4 percent by 2021. This will reflect a further increase in oil production, the impact of structural reforms, and an unlocking of bank lending, the statement read further down.
Financial sector weaknesses should be addressed promptly, the IMF mission said, as vulnerabilities from the slowing of growth and the depreciation persist, and bank lending is depressed. The NBK recently intervened at two small banks, and other banks may need additional capital to address high non-performing loans (NPLs). The government has provided support through placement of state deposits and subsidized lending programs.
Kazakhstan is implementing an ambitious reform program to support diversification and broad-based growth and improved efficiency of public administration. Under the flagship 100 Concrete Steps initiative, key efforts are underway to adopt legal and regulatory changes and spell out actions for implementation. Importantly, key assets have been identified for privatization.
A key milestone will be the successful conclusion of the first wave of IPOs (Air Astana, KazakhTelekom, KazAtomProm). Other IPOs and asset sales should follow (KazMunaiGas, Samruk Energy, and electricity distributors). In light of diversification and development objectives, special attention is needed for reforms and productivity in the agriculture and transportation sectors, the statement said.