BAKU, Azerbaijan, June 29
By Nargiz Sadikhova - Trend:
Kazakhstan’s fiscal policy will remain accommodative in 2021, Trend reports citing the Regional Economic Prospects report of the European Development Bank (EBRD).
The report said that Kazakhstan’s real GDP grew by 0.7 percent year-on-year in January-April 2021 compared to 0.2 percent contraction in the same period of 2020, signifying the beginning of a gradual recovery.
Construction was a major driver (up 12.5 percent year-on-year) benefitting from the inflow of pension savings – a stimulus measure introduced by the Kazakh government in January 2021.
Manufacturing, agriculture and trade contributed to the economic expansion. The slump in transportation continues: after losing 17 percent in 2020, the sector is down 9 percent (year-on-year) in the first four months of 2021.
The recovery is constrained by domestic restrictions to contain the spread of COVID-19 and reduction in mining output, to comply with OPEC+ agreements. Fixed investment declined 6.6 percent year-on-year in January-April 2021, dragged down by contraction of investment into mining, while investment in other sectors surged.
Exports shrank by 17 percent year-on-year in the first quarter of 2021 due to a substantial reduction of oil and gas exports. The exchange rate bottomed out in early April, after a short bout of depreciation triggered by new sanctions imposed on Russia in March 2021. It is currently stable, supported by elevated commodity prices.
While real estate prices surged, consumer price inflation (7.2 percent year-on-year in May 2021) remains only slightly above the central bank target thanks to exchange rate stability and subdued demand. The policy rate has been kept at 9.0 percent since July 2020.
Fiscal policy will remain accommodative in 2021, with authorities targeting a budget deficit of 3.5 percent of GDP. Real GDP is expected to grow by 3.6 percent in 2021 and 3.8 percent in 2022, supported by higher oil prices, fiscal stimulus and recovery of private consumption. Significant downside risks remain, including those related to the path of COVID-19 infections.
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