Kazakhstan's economy is set to expand by 5.9 percent this year, the International Monetary Fund said on Wednesday, raising its forecast in line with resurgent commodity prices and growth in neighbouring Russia and China, Reuters reported.
High oil prices and state support were enabling Kazakhstan's economy to outperform other emerging markets despite the residual effects of its banking crisis, said
Ana Lucia Coronel, IMF division chief for the Middle East and Central Asia.
But with annualised inflation running ahead of target, policymakers should be ready to tackle rising food prices and capital inflows as well as diversifying Central Asia's biggest economy beyond oil, gas and metals, Coronel told reporters.
Kazakhstan's economy grew by 7 percent last year and has risen by an average 8 percent annually over the last decade. The country, which sits on 3 percent of the world's recoverable oil reserves, has doubled crude output over the same period.
"Kazakhstan's pace of recovery compares favourably with other emerging economies," she said, after the IMF raised its 2011 economic growth forecast from an earlier 4.5-5.0 percent.
"Kazakhstan is achieving this high growth despite serious difficulties in the banking sector, which is something that other countries with similar banking sector problems, such as Ireland, Lithuania or Latvia, have been unable to achieve.
"This has been possible because of high oil prices and public sector support," she said, praising Kazakhstan for preserving windfall oil revenues in a national fund worth $30.6 billion at the start of 2011.
Though Kazakhstan's banking sector, among the first and hardest hit by the global financial crisis, has begun to recover, Coronel said non-performing loans on a 90-day overdue basis still accounted for about 25 percent of total loans.
"As long as non-performing loans remain high, banks' capital positions may be at risk and therefore balance sheets are not fully healthy," she said.
Coronel said Kazakhstan, like other emerging economies, faced a challenge in containing inflation as global food prices continue to rise. Food products comprise 38 percent of the consumer price basket in Kazakhstan.
"Inflationary pressures in Kazakhstan have increased considerably in line with global commodity markets," she said. "Rising global food prices are reflected in domestic food prices and are contributing to an upward trend in overall inflation."
Inflation in Kazakhstan ran at 8.4 percent in April on an annualised basis, exceeding the upper end of the government's full-year forecast of between 6 percent and 8 percent. Consumer prices have risen 4.2 percent since the beginning of the year.
The central bank raised its refinancing rate by 50 basis points to 7.5 percent from March 9, its first rise in 18 months, and has said it would consider further rises if needed to combat inflation.
"We believe they stand ready to respond to any wider price pressures if they develop," said Washington-based Coronel, who met with central bank officials during her visit to Kazakhstan.
The IMF has said it also expects Turkmenistan, Uzbekistan, Tajikistan and Kyrgyzstan to record economic growth of 5.0 percent or more in 2011. It issued the following forecasts for GDP growth in the Central Asia in 2011:
Country Year-on-year real GDP growth (percent)
2011 (f'cast) 2010 (actual) 2009 (actual)
Kazakhstan 5.9 7.0 1.2
Kyrgyzstan 5.0 -1.4 2.9
Tajikistan 5.8 6.5 3.9
Turkmenistan 9.0 9.2 6.1
Uzbekistan 7.0 8.5 8.1