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Kazakhstan's SMEs disproportionately affected by COVID-related quarantine measures

Business Materials 15 October 2020 16:27 (UTC +04:00)

BAKU, Azerbaijan, Oct. 15

By Nargiz Sadikhova - Trend:

Stringent measures to contain COVID-19 severely hurt services, triggering an economic recession in Kazakhstan in the year 2020, ADB Kazakhstan Resident Mission told Trend.

Recently launched Asian Development Outlook Update projects 3.2 percent of GDP contraction in 2020, the first full year with a decline in real GDP since 1998, followed by a gradual recovery in 2021.

In the first half of 2020, the economy contracted at an annual rate of 1.8 percent, reversing 4.1 percent growth in the same period of last year. A crisis-induced economic support program estimated to equal 9 percent of GDP mitigated deeper economic contraction by targeting infrastructure, manufacturing, and small and medium-sized enterprises (SMEs) while enhancing social protection. In April 2020 the state expenditure rose by 9.7 percent compared to the earlier approved budget, despite a projected 21.3 percent loss of tax revenues, while the National Fund transfer increased by 76.7 percent reaching $10.8 billion.

As the government declared a state of emergency from mid-March to mid-May, about 4.5 million people who lost their incomes under pandemic-containment restrictions received a monthly minimum wage support payment.

“SMEs play an important role in the economy of Kazakhstan. In 2019, they generated nearly 30 percent of the country’s GDP, employing more than 3.3 million people. As SMEs in Kazakhstan are predominantly operating in the service sector, including in the trade and the hospitality industry, they have been disproportionately affected by the quarantine measures, social distancing, and mobility restrictions,” the Resident Mission said.

Apart from a variety of policies that apply to business entities, including the deferral, reduction, and cancellation of tax and other payments, the government introduced a 1 trillion tenge ($2.3 billion) program to provide soft loans at a 6 percent interest rate specifically targeted for SMEs (government projected inflation rate was 9-11 percent for the year 2020), channeled through commercial banks.

“Eventually, as we understand these credit lines will be used by beneficiaries, and SMEs will be provided with a relatively large amount of liquidity to help to finance their business operations through this challenging period of time,” Resident Mission said.

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