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BISHKEK (TCA) — Call it stabilisation, call it stagnation. Another year has passed in which Central Asia’s national economies remained aloof from overall collapse. For a badly needed breakthrough, drastic measures needed have been confined to conference rooms and far away from reality.


A wave of terrorism, a foiled “colour revolution” and the country’s only new sizeable oil asset finally coming on stream. Those are the three main highlights for which in Kazakhstan the year 2016 is likely to be remembered. None of them had a major direct impact on the economy, the main feature of which for this year can be widely expected to be an overall standstill. Over the first three quarters of  2016, the country’s gross domestic product increased by a negligible 0.4 per cent year-on-year according to the latest update from the CIS Interstate Statistics Committee. In the first 10 months, industrial output declined by 1.7 per cent. Investments witnessed an increase of 4.1 per cent on-year in the first three quarters, while inflation stood at 6.2 per cent in October from the beginning of the year.

The most significant shift in terms of investments (increased by 4.7 per cent in the first 11 months of this year to 6 trillion tenge according to the government) consisted of a boost in foreign investments from under $3 billion to more than $12 billion in the first three quarters.

Some positive dynamics

Markets on which Kazakhstan still depends for the bulk of its national income have brought some pleasant surprises, especially over summer this year. Oil prices’ free fall has indeed been stopped, and the one-month contract for North Sea Brent which is the key indicator for Kazakhstan’s Urals blend now keeps narrowly oscillating around $50 per barrel.

Non-ferrous metal markets, most important for Kazakhstan next to oil, have also shown some positive dynamics. Of late, copper briefly topped $6,000 per tonne on the London Metal Exchange before dropping back to around $5,500, putting this year’s gains at 17 per cent but still below the price of nearly $6,300 it made at the beginning of 2015 - as opposed to zinc having gained 65 per cent, lead nearly a quarter and tin around 10 per cent so far this year. The main reason for the bullish trend on the market is found by commentators in China as usual, but also in the USA. “China's copper demand ran at 4-5 percent this year, well ahead of expectations after a credit injection by the world's biggest copper user in the first quarter fuelled construction demand,” a Reuters report posted on December 23 read. “Meanwhile, the surprise victory of Donald Trump in the United States election fed expectations he may drive economic growth through fiscal expenditure, boosting inflation and infrastructure spending.”

Should this happen, asset value of base metal and iron mines around the world should rise since America itself produces insufficient and overexpensive amounts of them itself. This would be excellent news for Central Asia. It should be remembered, though, that Obama made similar commitments eight years ago none of which he eventually kept.

Another contributor to Kazakhstan’s increased sales income is wheat, of which Kazakhstan sold close to 8 million tonne abroad so far this year. For the current marketing year from July 1 to June 30, the Kazakhs hope to put up to 9 million tonne on offer. Prices now oscillate around $180 per tonne, a 13.6 per cent increase so far this year. For the upcoming year, Kazakhstan hopes to increase its grain harvest from this year’s 17.8 million tonne to 23.7 million tonne – an all-time high.


In neighbouring Kyrgyzstan, which lacks the oil and gas reserves to let regular cash flow in, GDP in the first 10 months of 2016 increased by 2.7 per cent while industrial output shrunk by 0.6 per cent on-year, CIS ISC figures read. Thanks to a consistent policy in support of the exchange rate of the local currency, the nation has witnessed a deflation of 2 per cent from the beginning of the year till November.

The Kyrgyz National Statistics Committee reports a more upbeat assessment, and notes a 3.2 per cent on-year increase in GDP to 402.4 billion som (1 USD = close to 70 som) over the first 11 months of this year, along with a 2.7 per cent rise in industrial output to 178.3 billion som. According to the Committee, the improvements are “… due to increased production of precious metals (by 2.6 per cent), metal ore mining (by 2.3 times), production of refined petroleum products (31.5 per cent) and food products (by 13.8 per cent)”.

At the same time, food and agriculture remain heavily underperforming in Kyrgyzstan. According to the FAO, Kyrgyzstan harvested 1.66 million tonne of cereals this year, “… a decline of 5.5 per cent from the previous year on account of smaller wheat and maize crops. Wheat output is estimated at 654,000 tonne, down 7 per cent from the 2015 level following a sharp reduction in plantings in response to abundant supplies of good quality wheat from Kazakhstan and Russia,” in the organisation’s words. “Wheat imports in the 2016/17 marketing year (July/June) are forecast at 550,000 tonne, up 10 percent from the previous year’s level.”

While higher wheat market prices are set to increase the costs of Kyrgyzstan’s food basket, higher non-ferrous metals prices are set to increase the country’s income on sales. Especially gold has proven to be a beacon of stability in volatile markets, with prices firmly holding between the margins of $1,100 and $1,300 per troy ounce for several years now, and expected to remain by and large resistant against macroeconomic storms to come.

But sales market conditions are not enough to increase cash flows in productive sectors of the economy to desired proportions. The governments of both Kazakhstan and Kyrgyzstan lack proper value assessment of tangible assets, distinction between solid and debt-based investments, and willingness to put a moratorium on external state debts.


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