Kazakhstan optimistic on economy
Grigoriy Marchenko: “We believe that this year, GDP growth will be very limited, 0 to 1%, but still it won’t be negative “.
By Philip Hampsheir
The Governor of Kazakhstan’s National Bank explains what his country is doing to turn their economy round.
Kazakhstan’s economy will continue to grow even as the global economic crisis hits its banks, the governor of the nation’s central bank has said.
The collapse in oil and gas, along with a declining appetite for investment in developing economies has hurt the central Asian republic.
But Grigoriy Marchenko told the BBC that while economic growth would “be limited”, it would not be negative.
And the bank’s governor forecast growth of between 2% and 3% in 2010.
Since 2000, the economy of Kazakhstan has grown by nearly 10% every year on rising oil, cotton and wheat prices, but has hit difficulties.
The oil boom also encouraged Kazakh banks to borrow heavily from international sources.
They had $45bn (?29.5bn) of foreign debt when the US subprime crisis erupted – a situation made even less tenable by the 18% devaluation of the country’s currency, the tenge, in February.
Just as banks in the United Kingdom and United States have turned to their governments for assistance, so have those in Kazakhstan.
The government assumed some of the banks debts, laying down strict terms for their involvement in helping to recapitalise the banks.
“It was clear that some of the large Kazakh banks have over-borrowed,” Mr Marchenko said. “The bulk of this problem has been resolved already.”
He added: “We believe that this year, GDP growth will be very limited, 0 to 1%, but still it won’t be negative.
“Next year, we’re expecting growth of 2% to 3% and I think that after the overall crisis is over the Kazakh economy will be growing 5% to 7% per year.”
Credit ratings agencies are less optimistic, with Fitch estimating Kazakhstan’s GDP will fall by 5% next year with Standard & Poor’s expecting a 3% fall.
Mr Marchenko said measures would be taken to minimise future problems of over-borrowing – including moving to a model which would only allow companies and individuals whose cashflow was in dollars to borrow in the US currency.
However this measure “won’t be immediately because banks need time to prepare for it and we also need a properly functioning market for futures and forwards,” he said.