BAKU, Azerbaijan, October 6
By Nargiz Sadikhova - Trend:
Economic activity in Kazakhstan is projected to recover to its pre-pandemic level by end-2021, with growth of 3.2–3.7 percent in 2021 and 3.7 percent in 2022, Europe and Central Asia Economic Update, Fall 2021 published by the World Bank said, Trend cites the report.
The report said that the growth will be supported by the resumption of domestic activity, a supportive fiscal stance, and the rollout of vaccines. Improving growth prospects in foreign markets will buoy external demand for commodities.
“Household consumption growth will continue, aided by an income rebound. Recovery in exports and improved prospects for FDI in the mining sector, which along with planned housing and infrastructure projects, is expected to restore investment growth. Fiscal policy will remain supportive over the medium term. The budget will continue to prioritize spending on social assistance, education, human capital, infrastructure, and support to SMEs. Government debt is projected to increase further through 2023 as the authorities withdraw the fiscal support to the economy only gradually,” the report said.
Furthermore, inflation in Kazakhstan will remain above the target range of 4–6 percent in 2021 and is expected to decline gradually in following years, as the effect of the pandemic-linked temporary factors wanes.
“However, the rising cost of intermediate goods, real wage growth, and an expansionary fiscal stance with significant direct lending provisions can keep inflation high. With only a third of the population fully vaccinated by end-August, the vaccine rollout remains a prime concern. Without higher coverage, COVID-19 will continue to threaten the recovery. Increasing prices and elevated levels of absence from work could delay the reduction in poverty. Volatile oil prices and uncertainty over the scale of global demand for hydrocarbons are other risks that could weaken export and pressure exchange rate,” the report said.
The WB added that the recent increase in housing prices also makes home ownership less affordable and a steady rise in mortgage lending along with lifting of forbearance measures could expose the banking sector to higher NPLs in the event of future shocks.
Moreover, with the heavily reliant on hydrocarbons, the country faces challenges arising from the emissions reduction and low-carbon transition, said the report.