Kazakhstan Economic Outlook Positive But Banking Sector Challenges Remain

Kazakhstan Economic Outlook Positive But Banking Sector Challenges Remain

Economic growth in Kazakhstan is forecast to accelerate in 2017 reflecting continued fiscal spending to stimulate consumption and investment, and higher earnings from oil exports, says a new Asian Development Bank (ADB) report.

In its Asian Development Outlook (ADO) 2017, ADB forecasts Kazakhstan’s gross domestic product growth to reach 2.4% in 2017 and 2.2% in 2018, from the 1% registered in 2016. Annual inflation in 2017 is projected at 8% — within the National Bank’s target range of 6-8% — as authorities adjust the policy rate, use open market operations to control monetary growth, and maintain monopoly price controls. The report, however, notes the need to strengthen the banking sector as a key policy challenge. ADO is ADB’s flagship annual economic report.

“The measures being taken by the authorities to address the weaknesses of the banking sector are an important step in the right direction”, said Giovanni Capannelli, ADB’s Country Director for Kazakhstan. “But more needs to be done through stress-testing and asset quality review in line with international standards to identify which banks need additional capital and improve the assessment of non-performing loans.”

The report also highlights the benefits of improving transparency and communication to make ongoing efforts in the banking sector more effective.

The ADO suggests industry will expand by 2.4% in 2017, boosted by high infrastructure spending and increased production of oil and gas condensate. Oil production is expected to rise by 3.8% to 81 million tons with higher production at the Kashagan oil field compared to last year, and expansion of the Tengiz oil field. Agriculture is projected to grow by 3.5% in 2017 as a result of the new state support program.

Since joining ADB in 1994, Kazakhstan has received about $5 billion in sovereign and nonsovereign operations for agriculture, irrigation, education, finance, transport, as well as water supply and sanitation sectors. ADB’s support helped the country open up transport routes, foster private sector enterprises, support social equality, and develop knowledge products. Regional cooperation initiatives under the Central Asia Regional Economic Cooperation program remain an integral aspect of ADB operations in Kazakhstan.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region.

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