BAKU, Azerbaijan, Mar. 31
By Nargiz Sadikhova - Trend:
The coronavirus pandemic and the collapse in exports have taken a severe toll on the Kazakh economy, The World Bank’s Europe and Central Asia Economic Update, Spring 2021 report said, Trend reports citing the report.
The World Bank (WB) said that the country’s GDP fell for the first time in two decades, down by 2.6 percent in 2020.
“The nationwide mobility restrictions over COVID-19 led to a contraction in consumer demand and investment. Consumer demand fell 5.0 percent along with a drop in retail trade, while investment dropped by 3.4 percent, largely because of a sharp fall in FDI. Economic activity experienced a severe contraction in April-June of 2020, at the peak of restrictions, followed by a growth rebound in manufacturing, trade, and transportation services in the second half of the year,” the WB said.
The report said that a sharp fall in exports and commensurate reduction in imports left the current account balance broadly unchanged at 3.4 percent of GDP in 2020.
“Reserves of Kazakhstan’s National Bank (NBK) rose by almost $6.7 billion in December to reach $35.6 billion because of higher gold prices, despite heavy FX market interventions. The tenge fell by 15 percent against the dollar by April 2020 because of the collapse in oil prices but has since re-gained a third of its losses following the pickup in oil prices and FX interventions by NBK,” the report said.
The WB noted that the Kazakh government responded early to the COVID-19 crisis and introduced a fiscal stimulus package in the size of about 6 percent of GDP directed to SMEs and households.
“As a result, budget spending surged to an estimated 23.2 percent of GDP from a pre-crisis 19.5 percent. To fund the anti-crisis package, the government reallocated existing budgetary funds, tapped into Oil Fund reserves and scaled up domestic borrowing. The budget deficit rose to 4.0 percent of GDP from 1.8 percent a year earlier, and public debt moved up to 24.4 percent of GDP,” the WB said.
In February 2021, inflation rose to 7.4 per-cent year-on-year, up from 6.0 percent a year earlier, largely because of an 11.6 percent increase in food prices in January.
“Higher inflation also reflects the impact of the tenge depreciation. Despite higher inflation, the NBK kept its policy rate at 9.0 percent in January 2021. Despite the crisis, the banking sector recorded a positive return to assets of 2.3 percent, thanks to strong growth in consumer loans, while corporate lending remained subdued,” the WB said.
Nonperforming loans (NPLs) remained little changed at 6.8 per-cent of the loan portfolio in December.
“Government support measures, such as loan guarantees, moratoria, and subsidized loans helped halt mass corporate insolvencies during the lockdown. However, the true size of NPLs might emerge high-er than officially reported after the COVID-19 pandemic, when support measures taper off,” the bank said.
In 2020, the official unemployment rate changed little from a pre-pandemic level. However, the rate of temporary leave, especially among low-income workers, rose sharply during the national lockdowns. As a result, the poverty rate is estimated to have increased to 14 percent in 2020
---
Follow the author on Twitter: @nargiz_sadikh