Kazakh economy seriously affected by low oil price – expert

Kazakh economy seriously affected by low oil price – expert

Baku, Azerbaijan, Nov. 26

By Elena Kosolapova - Trend:

Situation in Kazakhstan's economy has turned out to be worse than forecasted early this year, according to Dosym Satpayev, director of the Kazakh Risk Assessment Group.

"Since late last year, the Kazakh government has been trying to prevent increase in unemployment," Satpayev, who is also a well-known political analyst in Kazakhstan, told Trend Nov. 26.

"Memorandums have been signed with major Kazakh enterprises for them to guarantee to preserve jobs, or in case of dismissal of an employee, to look for another job for that person," he added.

This week, Kazakhstan's Energy Minister Vladimir Shkolnik suggested that if oil price remains at a low level in 2016, the country's oil and gas sector may lay off over 40,000 people, the wages being cut by a third.

Meanwhile, major international financial institutions expect that the next year the average price of Brent oil will be $55-$58 per barrel.

"The statement made by Vladimir Shkolnik shows that the situation turned out to be worse than the government had expected," said Satpayev. "Most likely, the government expected the economic situation to slightly recover by mid-year. But it turned out that the situation got worse - the price of oil fell below $50. It is clear that it made our officials to be more pessimistic than they were at the beginning of the year."

At the same time, the analyst said that unemployment grows not only in the oil and gas sector, but almost in all sectors of the economy of Kazakhstan.

This year, an unfavorable economic environment for Kazakh businessmen has formed due to the fact that the markets of the country began to receive cheaper Russian and Belarusian goods, which made Kazakh producers uncompetitive.

"So the problem is much more serious," said Satpayev.

The foreign specialists are less interested in Kazakhstan's labor market. The reason is that the salary in dollar equivalent does not correspond to their requirements following the recent great depreciation of the tenge rate.

During three months the rate dropped from 186 tenge per $1 in July to 307 as of November 25.

The tenge exchange rate began falling after the National Bank abolished the currency corridor and switched to the inflation targeting regime to implement the new monetary policy August 20.

As a result, the tenge rate sharply decreased in value by about 30 percent.

The National Bank stopped passing to a free floating exchange rate and began selling the currency on the market in September and October.

Over the past two years, the tenge rate decreased in value by over twofold.

The tenge exchange rate reached 154.06 per $1 in early 2014.

At the same time, the expert does not think that a decrease in jobs in Kazakhstan will lead to labor migration from the country. The reason is that a similar deterioration in the economic situation is observed in the post-Soviet area and foreign countries.

The expert believes that in order to prevent the unemployment in Kazakhstan, the country needs to support the small and medium-sized entrepreneurship which could enable to create new jobs.

"State policy for concessional lending is needed for this," he added.

Satpayev expressed hope that amid the low oil prices, Kazakh officials will have to revise their attitude to economy and deeply think over developing the non-oil sector.

"The practice shows that high oil prices will not help improve the competitiveness of our economy," said the expert. "Unfortunately, over these 20 years, we did not create an alternative sector of economy, which could offset the current crisis in the mining sector."


Follow the author on Twitter: @E_Kosolapova

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