Drivers of growth: oil, gas, and domestic demand
Oct 29. Kazpravda. Almaty
By Alevtina DONSKIH
Economic activity in the countries of Caucasus and Central Asia will continue to grow rapidly, and the region will be one of the fastest growing in the world.
This forecast was voiced at the official presentation of the IMF report » Regional Economic Outlook: Caucasus and Central Asia,» made by Deputy Director of the Middle East and Central Asia Department Juha K?hk?nen. The presentation was organized by the National Bank of Kazakhstan with participation of the RFCAAcademy.
The report notes that the driving force of growth is the rise in the hydrocarbon sector and growth of domestic demand. The analysts of the IMF believe that in 2013-2014 the countries of the region will maintain strong economic growth, at the level of 6%. GDP growth for Kazakhstan is predicted at 5% in 2013 and 5.2% in 2014.
Overall fiscal balance of the general government bodies of Kazakhstan will be positive and, according to IMF estimates will make up 4.8 % in 2013 and 4.1 % in 2014.
However, the implementation of these forecasts and prospects may be prevented by significant external risks, in particular the expected decline in commodity prices. The decrease of external demand and prices for oil and gas can put pressure on external positions of some countries in the region. Also decline is projected in the overall current account surpluses of the region from 4.75 % in 2012 to about 3 % of GDP in 2014 for the reduction of surpluses of countries — exporters of oil and gas, especially of Azerbaijan and Kazakhstan.
The experts also expect increase of an average annual inflation of consumer prices in the region by about 2% in 2013-2014. Partly it is the result of growing tariffs on power consumption and regulated tariffs of utilities, for example, in Kazakhstan, according to the report. But in general, inflation will remain in the «comfort range» of central banks, and monetary policy will remain unchanged in most countries.
According to the forecast, the inflation in RK is 6.3 % for this and coming year.
Mr. Juha K?hk?nen also noted the weak points of the financial sector of the republic: increased volume of non-performing loans, which requires, according to him, the tightening of regulatory classification of loans and credit management.
The report notes the steps in the right direction and measures taken by central banks to strengthen prudential regulation and supervision «in order to improve the efficiency and strength of the financial sector.» Thus, Kazakhstan has recently introduced a scheme that provides options for banks to tackle the problem of non-performing loans, and is currently considering measures to further strengthen the scheme, — said the speaker . Another factor that exacerbates the vulnerability of the financial sector is «widespread dollarization”, which not only weakens the transmission mechanism of monetary policy, but also provokes the vulnerability of the banking system in the event of any large fluctuations in exchange rates.»
The IMF also made recommendations for the region. In particular, the exporters of hydrocarbon resources are recommended to switch to a more neutral course of fiscal policy in 2013-2014 to ensure medium-term fiscal sustainability. It is also recommended to reinforce these measures by more flexible exchange rates to help increase the external buffer reserves, to raise competitiveness and to address vulnerabilities arising from high levels of dollarization.
In general, the positive outlook currently also gives the countries an opportunity to strengthen the basis of the policy and to begin the process of structural transformation in order to become dynamically developing countries with emerging economies; it is summarized in the report.