Economic Developments - December 2018

IMF has forecast that Kazakhstan will see a GDP growth of 3.7% in 2018. Economic growth will be driven by higher oil production as well as increased activities in trade and manufacturing industry. Kazakhstan’s economic growth accelerated in 2017 due to measures taken by Government, including budget support, flexible exchange rate, use of inflation targeting as well as strengthening banking sector and implementation of structural reforms. Economic growth is expected to continue although some risks such as hydrocarbon prices do exist.

GDP growth in Kazakhstan in 2019 is expected to be 3.8%, while average annual growth during 2019-2023 will be 4.1%. Per capita GDP is expected to be US $9,400 in 2019 increasing to US$12,100 in 2023. Processing and mining industries will see 4.1% and 3% growth respectively. Stable growth rate will be retained in agriculture - 6.4%, in construction sector - 4.1%, and in trade - 4.4%. Exports will amount to US$ 54.1 billion and will increase to US$ 65.7 billion in 2023. Imports will amount to US$ 32.9 billion in 2019 and will increase to US$ 39.6 billion in 2023. Volume of oil output will be preserved at 88 million tonnes in 2019 and will increase to 99 million tonnes in 2023. Inflation is expected at 4-6% in 2019 with further decrease to 3.4% in 2020-2023. 

In first half of 2018, Chinese investments in Kazakhstan amounted to US$ 15.6 billion, compared to US$ 14.8 billion in 2017. In last three years, there has been a 6.6% increase in investment flows from China to Kazakhstan. The 5 most attractive Kazakh sectors for Chinese investors are transportation and warehousing (US$4.9 billion), mining (US$2.6 billion), financial and insurance activities (US$2.2 billion), construction (US$2.1 billion) and manufacturing (US$2.1 billion). These industries accounted for 88.9% (US$14 billion) of the total Chinese investments in January-June 2018. Total number of Kazakh-Chinese investment projects is 51, and total investment is estimated at more than US$27 billion. In 2018-2019, eleven more projects worth more than US$ 4.4 billion investment will be launched.

It is planned to implement 30 investment projects worth US$36.5 billion in Uzbekistan in geological exploration, production and deep processing of hydrocarbons for further development of the oil and gas sector until 2030. If specific measures are not taken to increase hydrocarbon reserves, the existing reserves will shrink to half over the next 10-15 years. Most gas pipelines and gas distribution system were built in the last century and are in need of repair. In order to guarantee supply of natural gas to consumers, a project worth US$1.6 billion will be implemented to modernize the trunk gas transmission system and control gas flows.

Prime Minister of Kazakhstan Bakytzhan Sagintayev paid a state visit to China and met with President Xi Jinping in Beijing. Both leaders agreed to enhance policy synergy between the two countries by aligning China’s Silk Road Economic Belt (SREB) with Kazakhstan’s Nurly Zhol (Bright Path) economic program. Sagintaev said that China is Kazakhstan’s friendly neighbour, close friend, and strategic partner. Kazakhstan has been fully supportive of Chinese SREB initiative since it was proposed by President Xi five years ago. Top exports of Kazakhstan are crude petroleum, refined copper and gas among others. The Kazakh government is keen to increase its gas exports to China next year.

Russia is working on designing a satellite for Kazakhstan, and has invited Uzbekistan to cooperate. The new spacecraft will replace the currently functioning KazSat-2 satellite. The new satellite will be called KazSat-2R, and will be a much more modern and powerful device. 

Russian state-run gas company Gazprom will resume natural gas imports from Turkmenistan for the first time in three years in 2019 seeking to project itself back into a more prominent role in a country tethered to Chinese debt. Russia used to control Turkmenistan’s natural gas export routes, cheaply purchasing the fuel and shipping it to Europe. But Turkmenistan shifted away from Moscow in 2009 when it opened a pipeline connecting it with China. In 2016, Russia stopped importing natural gas from Turkmenistan after the country refused to lower prices. China has since been the sole buyer of Turkmenistan's gas. Turkmenistan, which relies on natural gas exports for 70% of its revenue, has become worse off financially amid a mounting debt owed to China.

Turkmenistan has decided to end its generous subsidies for natural gas, water, and electricity because of its economic problems. Residents will be experiencing this shock after enjoying the benefits for 25 years. Decision announced amid an ongoing economic crisis is rattling more than citizens' psyches. Household budgets, too, will be hit as people are required to pay both for utilities and necessary equipment. Under the subsidies introduced in 1993, every person was entitled to 35 kilowatt hours of electricity and 50 cubic meters of natural gas each month. Subsidies also included 250 liters of water per day per person.

Kazakh President Nazarbayev has said that Astana Hub is to become Kazakhstan’s centre of innovation. Users of the hub’s technopark will enjoy a simplified visa regime, greater labour mobility, tax benefits and expert mentorship on their start-ups. He said that Kazakhstan needs to create a new generation of IT talents, and the government’s main task is to help the country’s smart and capable youth. 

President of European Bank for Reconstruction and Development (EBRD) stated that successful diversification is the way forward for economies of Central Asia as the region reassumes its ancient role as a bridge joining Europe with the Far East. EBRD is the largest single investor in Central Asia with a total investment of US$ 14 billion. 

Bilateral trade between Russia and Kazakhstan reached US$11 billion in first eight months of 2018 and is projected to reach US$18 billion by end of the year. Russia is Kazakhstan’s largest export partner and Kazakh exports of processed goods to Russia grew 82% in the first eight months of 2018. The two countries have traditionally cooperated in oil and gas, mining and metallurgy, agriculture and chemical production and now want to increase tourism cooperation. 

After more than 40 years, billions of dollars, and countless tons of concrete, the first phase of Tajikistan's Roghun hydropower plant was inaugurated by President Emomali Rahmon. Currently standing at 75 meters, enough to begin generating electricity, the dam will ultimately reach a height of 335 meters and be the world's tallest dam. The US$3.9 billion hydro-electric power plant will enable Tajikistan to eliminate domestic energy shortages and export electricity to Afghanistan and Pakistan.

According to annual World Bank Ease of Doing Business report, Kazakhstan registered an improvement of 8 positions as compared to last year by coming on rank 28.  This is proof that the economic and regulatory reforms, targeted state- and private- sector investments, and President Nazarbayev's clear modernization agenda have had measurable results. Foreign and domestic corporations, investors, SMEs and entrepreneurs have benefited.

 

December 28, 2018

E-mail me when people leave their comments –

You need to be a member of Ananta Centre to add comments!

Join Ananta Centre

About the Author

Ambassador Ashok Sajjanhar belongs to the Indian Foreign Service and has acquitted his responsibilities in the diplomatic service for 34 years. He was Ambassador of India to Kazakhstan, Sweden and Latvia and has worked in senior diplomatic positions in Indian Embassies/Missions in Washington DC, Brussels, Moscow, Geneva, Tehran, Dhaka and Bangkok and also at Headquarters in India. He negotiated for India in the Uruguay Round of Multilateral Trade Negotiations and in negotiations for India-EU, India-ASEAN and India-Thailand Free Trade Agreements.

He contributed significantly to strengthening strategic ties and promoting cultural cooperation between India and USA, EU, Russia and other countries.Ambassador Sajjanhar worked as head of National Foundation for Communal Harmony to promote amity and understanding between different religions, faiths and beliefs. Ambassador Sajjanhar has been decorated by Governments of Kazakhstan and Latvia with their National Awards and by Universal Peace Federation with Title of ''Ambassador of Peace.'' Currently Ambassador Sajjanhar is President of Institute of Global Studies, New Delhi. He writes, travels and speaks extensively on issues relating to international relations, foreign policy and themes of contemporary relevance and significance. He appears widely on TV panel discussions. Ambassador Sajjanhar is interested in reading, music and travelling. His wife Madhu is an economist and an educationist. They have a son and a daughter both of who are accomplished singers. Their son passed out of Yale University and their daughter is pursuing her PhD at University of Minnesota.