The EDB expects Kazakhstan’s economy to recover in 2021–2022

13 October 2020

Moscow, 13 October 2020. The Eurasian Development Bank (EDB) projects Kazakhstan’s GDP to grow at 4.7% a year on average in 2021–2022, after a 2.5% decline this year. This is a finding presented in the Macroreview published by the EDB’s Directorate for Research.

The COVID-19 pandemic has resulted in an unprecedented drop in global business activity and international trade. Kazakhstan’s economy shrank by 1.8% year-on-year in January-June 2020. Domestic sanitary restrictions, lower external demand, falling oil prices, and slowing oil production under OPEC+ agreements were the key factors that affected economic growth.

The EDB’s baseline projection suggests that easing quarantine restrictions (compared to those imposed in the spring) in the second half of the year and maintaining stimulating monetary and fiscal policies will be conducive to economic recovery. The government is expected to continue to extend anti-crisis support in 2021 to mitigate the negative impacts of the pandemic on the economy. As a result, EDB analysts project Kazakhstan’s GDP to grow at 4.7% a year on average in 2021–2022, after a 2.5% decline in 2020. At the same time, because of increased uncertainty, social distancing, restrained external demand, and weaker investment activity, this process will be long – a return to the pre-crisis production levels is expected in 2021–2022, while the output gap will remain negative throughout the projection horizon.

The review notes that, in May–June, Kazakhstan’s tenge partially won back its lost positions and appreciated to KZT 397 per US dollar, as economic activity began to recuperate both in the country and abroad, and oil prices went up. In the second half of August–early September 2020, volatility increased in regional financial markets due to geopolitical risks, which are expected to persist and thus restrain the potential appreciation of the national currency. The EDB expects the exchange rate of the tenge to improve to an equilibrium level in 2021, provided that the spread of the coronavirus slows down, and the geopolitical situation normalises.

This year, the growth rate of the consumer price index accelerated to an extent because of the exchange rate pass-through effect, temporary rush demand for certain goods, and a rise in prices for fruit and vegetables. By the end of 2020, the EDB projects inflation at 7.1% year-on-year as the depreciating national currency will continue to put pressure on prices.

According to Aigul Berdigulova, Senior Analyst at the EDB, the persistently high risks may worsen the projections as the emerging economic recovery remains unstable because of the continuing threat of a large-scale second wave of the pandemic, the aggravation of US–Chinese relationships, and the strengthening of sanction rhetoric against Russia, and the associated negative effects may impact Kazakhstan’s economy through trade and financial channels.

Additional Information:

The Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. The EDB's charter capital totals US $7 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.

The EDB Media Centre:

Alexander Savelyev +7 (985) 765 23 59 (Moscow)

Azima Sapargaliyeva +7 (777) 750 00 08 (Almaty)

Sergey Gorbachev +7 (916) 727 22 00 (Moscow)

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