Mining industry to ensure Kazakhstan's GDP growth - Renaissance Capital

Business Materials 7 April 2022 14:33 (UTC +04:00)
Mining industry to ensure Kazakhstan's GDP growth - Renaissance Capital
Nargiz Sadikhova
Nargiz Sadikhova
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BAKU, Azerbaijan, April 7. The mining industry can ensure Kazakhstan's GDP growth by three percent compared to the previous year, Russia's Renaissance Capital investment bank told Trend.

Mineral raw materials are still the basis of Kazakhstan’s export, it accounts for 60 percent of merchandise exports (according to data from 2019 through 2021).

"Oil dominates in the structure of commodity exports, the share of gas is only 5 percent. About 20 percent of exports are accounted for by products of ferrous metallurgy, copper, and uranium and world prices for these commodities are likely to rise as much this year as energy prices," the bank said.

According to official statistics, the share of the oil and gas sector in the structure of Kazakhstan's GDP is approximately 21 percent, but in a broad definition (taking into account industries serving this sector and financial flows), the contribution of the oil and gas industry, according to the bank, exceeds 30 percent.

"We expect oil production in Kazakhstan to grow by 5-6 percent in 2022, compared to the previous year and this growth will offset the decline in 2020 and the lack of production growth in 2021," the bank said.

At the same time, oil prices are now 50 percent higher than the average for 2021 and according to our calculations, each increase in the price of a barrel of hydrocarbon raw materials by $10 provides an increase in the rate of Kazakhstan's GDP growth by approximately 0.4 percentage points, the bank noted.

"Taking this into account we assume that the extractive industry can ensure Kazakhstan’s GDP growth by 3 percent in 2022 compared to the previous year," the bank added.

The main buyers of Kazakh oil are traditionally European countries – in 2021, the EU received more than 60 percent of Kazakhstani oil exports, while China and India accounted for only 10 percent, the bank noted.

Most of the oil exported by Kazakhstan is transported through Russia. This is a fairly significant factor of vulnerability, given the recent escalating sanctions pressure on Russia. However, we proceed from the fact that the probability of blocking Russian oil pipelines is very small and the prospect of a possible reduction in the purchase of Russian energy resources by the EU should ensure stable demand for Kazakhstani hydrocarbons, the bank noted.

Kazakhstan's dependence on Russian pipelines should be seen as part of transaction costs or as a risk of short-term supply disruptions in such a situation, the bank added.

"US Department of the Treasury issued a clarification about US decision to suspend oil purchases from Russia, clarifying that the ban does not apply to Kazakh oil supplied through the Caspian Pipeline Consortium (CPC), which is 75 percent of oil exports of Kazakhstan. This is good news for Kazakhstan," the bank said.