世界发展银行-Kazakhstan-Economic-Update,-December-2020---A-Slow-Recovery-Through-the-COVID-19-Crisis_36页_14mb

Kazakhstan Economic Update - December 2020 Summary

Core Content

The Kazakhstan Economic Update (December 2020) provides a comprehensive overview of the country's economic performance and policy responses during the COVID-19 pandemic, which proved to be the most challenging year for Kazakhstan in the last two decades. The report highlights the economic contraction, inflationary pressures, and the role of both monetary and fiscal policies in mitigating the crisis's impact.

Main Points

• Economic Contraction:
  Kazakhstan experienced a significant economic decline in 2020, with GDP contracting by 2.8% in January-September compared to the previous year. The contraction was the worst in two decades, driven by reduced domestic demand, job losses, and lower disposable income.

  • The services sector, especially retail, hospitality, transport, and travel, was hit hardest due to movement restrictions and social distancing measures.
  • The oil price drop to $21 per barrel in April 2020, the lowest in two decades, severely impacted export revenues.
  • Despite a slight rebound in Q3 and Q4, the economy is still projected to shrink by 2.5% in 2020.

• Inflationary Pressures:

  • Annual inflation reached 7.0% in September 2020, surpassing the 4-6% target range of the National Bank of Kazakhstan (NBK).
  • Food prices rose sharply, driven by supply disruptions and hoarding behavior.
  • Non-food items and services also saw inflationary pressures, with non-food inflation at 5.5% and services at 3.6% in September 2020.
  • Import prices increased due to exchange rate depreciation, further contributing to inflation.

• Balance of Payments:

  • Exports fell significantly, reaching $35 billion in January-September 2020, compared to $43 billion in the same period in 2019.
  • Imports decreased to $26 billion, down from $29 billion in 2019.
  • The current account deficit was -3.5% of GDP, slightly better than the previous year’s -3.9%.
  • Gross international reserves increased to $33.6 billion by the end of September 2020, up from $29 billion in 2019.
  • Gold reserves rose to $23 billion in September 2020, up from $18 billion the previous year.

• Monetary Policy and Financial Sector:

  • The National Bank of Kazakhstan (NBK) faced the challenge of containing inflation that rose above its target range.
  • The tenge depreciated by 18% against the USD in March 2020 due to oil price collapse and economic uncertainty.
  • The NBK intervened heavily in the FX market, using $1.8 billion in FX reserves to stabilize the currency.
  • Non-performing loans (NPLs) increased to 8.7% of total loans by September 2020, up from 8.1% in early 2020.
  • Subsidized lending to SMEs and the use of regulatory forbearance measures may mask underlying stress in the banking sector, and the true extent of problem loans could emerge when these measures are lifted.

• Fiscal Policy Response:

  • The government implemented a $10 billion stimulus package, equivalent to 5.7% of GDP, to support SMEs and households.
  • The package included tax deferrals, cash transfers, and subsidized loans.
  • Tax revenue declined by $2.6 billion in January-September 2020 due to reduced economic activity.
  • The National Fund (NFRK) played a key role in funding the fiscal response, contributing 7.1% of GDP in 2020.
  • Government debt-to-GDP ratio rose by 6 percentage points to 26% in 2020, but remains sustainable.
  • The budget deficit reached 4.2% of GDP, up from 1.5% in 2019, with the non-oil deficit surging to 14.3%.

Economic Outlook and Risks

• Growth Projections:

  • The economy is expected to grow modestly by 2.5% in 2021 and higher in 2022, driven by improved global conditions, increased export demand, and vaccine rollouts.
  • Risks remain, including uneven global recovery, higher debt-related risks, and continued oil price volatility due to OPEC+ production cuts.

• Reforms and Governance:

  • The government has taken steps to renew reform momentum, including the establishment of the Agency of Strategic Planning and Reforms.
  • Monetary policy is expected to evolve with a new strategy to improve effectiveness.
  • SMEs and financial sector are vulnerable to non-performing loans if support measures are withdrawn.
  • Poverty is expected to rise to 12-14% in 2020, up from 6% in 2016, with rural areas likely to see the largest increase in poverty, exacerbating income inequality.

Key Figures

• GDP contraction: -2.8% (Jan-Sep 2020)
• Inflation rate: 7.0% (Sep 2020)
• Oil price: $21 per barrel (April 2020)
• Current account deficit: -3.5% of GDP (Jan-Sep 2020)
• Non-performing loans (NPLs): 8.7% (Sep 2020)
• Government debt-to-GDP: 26% (2020)
• Fiscal stimulus package: $10 billion (5.7% of GDP)
• Poverty rate increase: 12-14% (2020)
• Tenge depreciation: 18% (March 2020)
• Gross international reserves: $33.6 billion (Sep 2020)
• Gold reserves: $23 billion (Sep 2020)

Conclusion

Kazakhstan's economy faced a severe contraction in 2020 due to the double shock of the pandemic and oil price collapse. The government and central bank implemented support measures to stabilize the economy and reduce poverty, but long-term reforms and monetary policy adjustments are needed to ensure sustainable recovery and economic resilience.