BAKU, Azerbaijan, Feb. 18
By Nargiz Sadikhova - Trend:
The World Bank (WB) projects that Kazakhstan’s economy will grow moderately by 2.5 percent in 2021, the WB told Trend.
The WB said that the economic fallout from COVID-19 poses significant challenges for the Kazakh economy. Although activity has normalized somewhat following a gradual reopening in early August, the recovery is still fragile as a second wave of the virus has accelerated.
“The economic activity has remained under pressure from the recent resurgence in the number of cases across the country, and the re-introduction of stricter lockdown measures. Business activity has been constrained by uncertainty over the course of the virus and economic slack, and there is limited appetite for risk-taking and expanding investments,” the WB said.
The WB said the declining activity in mining, and most notably in the service sectors that require face-to-face interactions, pose a threat for employment prospects and might take a heavy toll on many low-paid workers’ living standards.
“The economy faced a contraction in 2020, and economic recovery hinges on progress to bring the pandemic under control. The baseline forecast is that GDP growth will rebound to 2.5 percent in 2021, with a steady increase in the pace of growth in 2022. The baseline scenario assumes gradual relaxation of control measures associated with the virus, and COVID-19 vaccines become available, and inoculation,” the WB said.
The WB said it projects the economy will grow moderately by 2.5 percent in 2021, supported by a rise in consumption spending and resumption of investment delayed by the COVID-19 induced restrictions. The pace of economic recovery remains dependent on the situation around the pandemic.
“A successful rollout of the COVID-19 vaccine can boost confidence and offer impetus to economic activity across the country. However, risks remain elevated because of uncertainty about external demand and prices for oil, exposure to insolvencies, and possible adverse effect on the balance sheet of a banking sector. be carried out in the country and across the globe,” the WB said.
The growth projection for 2021 also assumes that growth rebounds in key export markets, global demand for oil recovers and prices for oil stabilize around $ 40 per barrel. Further, it is assumed that domestic fiscal policy will remain supportive. Even with the projected GDP growth, the economy is expected to reach its pre-crisis level of activity only by 2022.
On the back of uncertainty over global demand for oil and the OPEC+ group’s decision, the baseline forecast is only a little increase in oil production and exports.
“Private consumption is projected to continue recovering in 2021-22, as rising social spending is likely to support disposable incomes, and demand and precautionary saving motives will wind down after the relaxation of the imposed limits on movement. However, slow growth and meager employment prospects can act as a drag on consumer spending,” the WB said.
While investment decreased in 2020 in the face of the COVID-19 and plunging FDIs into the mining industry, the baseline forecast is for the investment to recover gradually in 2021-22 at a very limited pace as uncertainty diminishes, the WB added.