Kazakhstan's Economic Growth to Remain Positive Despite COVID-19 — ADB
NUR-SULTAN, KAZAKHSTAN (3 April 2020) — Despite the COVID-19 outbreak, in 2020 Kazakhstan’s economic growth is forecast to remain positive thanks to government support measures and is expected to rebound in 2021, reflecting stronger oil revenues and an expansionary fiscal policy, says a new Asian Development Bank (ADB) report.
The Asian Development Outlook (ADO) 2020, ADB’s flagship annual economic publication, projects Kazakhstan’s gross domestic product (GDP) growth to drop to 1.8% in 2020 given the economic implications of COVID-19 and a reduction in oil and gas production due to declining prices. Substantial downside risks to the outlook stem from a protracted global economic slowdown and a continued plummeting of global oil prices. In 2021, the growth is expected to rebound to 3.6%, supported by rising hydrocarbon and manufacturing output, and higher investments.
“Plunging oil prices and the enormous challenges created by COVID-19 put Kazakhstan’s economy under an unprecedented stress test,” said ADB Country Director for Kazakhstan Giovanni Capannelli. “ADB is Kazakhstan’s long-standing partner in promoting sustainable and inclusive growth. We remain committed to continue supporting the country in fighting this new pandemic, keeping the economy in shape, and maintaining social cohesion.”
The report forecasts that industry will expand by 1.2% in 2020 with continued government support for manufacturing, and by 4.5% in 2021 with the waning impact of external shocks. As a state of emergency declared to contain COVID-19 adversely affects transport, trade, and the hospitality industry, services are projected to grow by only 1.5% in 2020 then rise to 3.3% in 2021.
Construction is forecast to expand by 6.1% in 2020 and 4.9% in 2021 as a result of support measures included in the government’s stimulus package. In the agriculture sector, growth is forecast to accelerate to 2.9% in 2020 and 3.2% in 2021 with crop production and further livestock expansion.
Inflation is projected to accelerate to 6.0% in 2020 and edge down to 5.7% in 2021 as a result of administrative and monetary measures. The government’s pledge to utilize regional food stockpiles should help maintain price stability and trim food price inflation.
The ADB report notes that the government’s assistance program is helping moderate the impact of shocks on the vulnerable population. The country’s welfare system, which recent measures have largely strengthened, plays a unique role as a stabilizer during crises. However, an analysis of the underlying financing model demonstrates the unsustainability of the existing approach in the long run. Improving revenue collection and administration of the social assistance program are basic reforms needed to ensure the sustainability of the welfare system.
Kazakhstan was the first Central Asian country to join ADB in 1994. Since then, ADB approved about $6 billion in sovereign and private sector loans, and technical assistance grants in support of transport, agriculture, water, education, health, as well as finance and public sector management. ADB’s support is helping the country develop and upgrade its regional connectivity, support private sector enterprises, foster gender and social equality, and deliver knowledge products and services. Regional cooperation and integration initiatives under the Central Asia Regional Economic Cooperation program remain an integral aspect of ADB operations in Kazakhstan.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.