Kazakhstan’s Economy Has Bottomed Out, Now Searching for New Sources of Growth
The FINANCIAL — Kazakhstan’s economic growth is projected to accelerate in 2017, owing to higher oil prices and oil production, says the World Bank’s latest Kazakhstan Economic Update.
According to the special topic of the report, dedicated to agriculture, better utilization of agricultural land and higher labor productivity in the sector can greatly benefit Kazakhstan’s economy.
Last year, Kazakhstan’s economy continued to suffer from a protracted slowdown in global oil prices and weak domestic demand. Real Gross Domestic Product (GDP) growth slowed from 1.2 percent in 2015 to 1 percent in 2016.
“In 2016, the slowdown of GDP growth and a decline in real wages adversely affected poverty rates,” says Ato Brown, World Bank Country Manager for Kazakhstan. “But our projection is that economic activity will slowly pick-up as oil prices recover and oil production gradually expands, yet GDP growth will remain lower than before 2014. The non-oil economy is also projected to expand, aided by gradually improving investor sentiment and consumer confidence that will support domestic demand. As the inflationary effect of currency depreciation fades, real wages and the purchasing power of the population are expected to improve. This may help poverty reduction, but at much lower pace than we saw before.”
The World Bank expects Kazakhstan’s economic growth to hover around 3 percent a year from 2017-19. To accelerate and deliver more sustainable and inclusive growth, Kazakhstan will need to complete the macroeconomic adjustment to the ‘new normal’ – addressing the legacy of financial sector issues and fostering the development of a more dynamic, export-oriented, and productive private sector.
Special Focus on Agriculture as a Potential Driver of Growth
According to the World Bank, there are significant opportunities for Kazakhstan to increase labor productivity in agriculture—which remains below that of Russia and Belarus—and to employ unutilized land, which represents almost 15 percent of the country’s total arable land. The country’s location and scale of agricultural resources also makes Kazakhstan very attractive to domestic and foreign investors.
“Agriculture is a very important sector for diversification of the Kazakh economy. Low energy prices and a subdued growth rate in other sectors make the agricultural sector a top priority,” highlights Brown. “Fostering an enabling environment for agriculture is a prerequisite to unleash the potential of the sector for boosting growth and reducing poverty. The focus should also be on agricultural research, innovation, and education. Access to finance is also an important agenda to address.”
Agriculture growth in Kazakhstan averaged 4.4 percent between 2001-16. Although this growth was often slower than the rest of the economy and uneven from year to year, due to climatic factors, it has nonetheless been robust and has outpaced the rest of the economy over the last few years. The sector continues to employ almost one-fifth of the working population in the country and is therefore critical for addressing poverty and food security.