Economic Newsletter on Kazakhstan |June 2020
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Economic Newsletter on Kazakhstan |June 2020 CONTENTS MACRO-ECONOMICS & FINANCE ......................................................................................2 ENERGY & NATURAL RESOURCES ......................................................................................5 TRANSPORT & COMMUNICATIONS...................................................................................9 AGRICULTURE ................................................................................................................. 10 CONTACTS ...................................................................................................................... 13 The Economic Section of the Embassy of the Kingdom of the Netherlands in Kazakhstan intends to distribute this newsletter as widely as possible among Dutch institutions, companies and persons from the Netherlands. The newsletter summarises economic news from various Kazakhstani and foreign publications and aims to provide accurate information. However, the Embassy cannot be held responsible for any mistakes or omissions in the bulletin. ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands MACRO-ECONOMICS & FINANCE Kazakhstan’s national budget receives almost 25% less taxes The state budget of Kazakhstan began to receive less income, including tax revenues. Over 5 months of 2020, the state budget income of Kazakhstan amounted to more than 3.4 trillion tenge, which is 10% less than in 5 months of 2019. This is evidenced by the data of the State Revenue Committee. Tax revenues of the state budget for the reporting period decreased by 9.7% to 3.3 trillion tenge. The value includes income tax of 1.2 trillion tenge and domestic taxes on goods and services of 1.3 trillion tenge. By regions, the most taxes to the state budget came from Almaty at 884.9 billion tenge, Atyrau region at 537.7 billion tenge, Nur-Sultan at 406.4 billion tenge, Almaty region at 197.5 billion tenge, Karaganda at 142, 8 billion tenge. In January-May 2020, the tax revenues to the national budget amounted to more than 2 trillion tenge and decreased by 24.5% compared to the same period in 2019. Local budgets in turn received more than 1.26 trillion tenge of taxes over five months. Value increased by 32.7% compared with the five months of 2019. As for receipts to the National Fund, in January-April 2020 they exceeded 1 trillion tenge, decreasing by 28.7% compared to the same period in 2019, LS reported. International Monetary Fund downgrades forecast for Kazakhstan’s GDP for 2020 The International Monetary Fund downgraded Kazakhstan’s GDP forecast in 2020 by 2.7%. According to the forecast published in the June IMF report, the real GDP of Kazakhstan will decrease in 2020 by 2.7%. However, already in 2021 an increase of 3% is expected. A month earlier, the country’s GDP was expected to decline by 2.5% this year, and growth next year to 4.1%. According to the forecast, the global economy will shrink this year by 4.9%, against 3% previously forecasted. In 2021, the increase will be only 5.4%, and not 5.8% as previously expected. “Compared to the April issue of World Economic Outlook, we now forecast a deeper decline in 2020 and a slower recovery in 2021. Worldwide production is projected to decline by 4.9% in 2020. These expectations imply aggregate losses for the world economy as a result of the crisis in the amount of over $12 trillion in two years, 2020– 2021. This crisis is different from all others, and the recovery from it will not be like anything else,” the IMF report said. Earlier, the Asian Development Bank revised the outlook for Kazakhstan’s economy in a negative direction. The Minister of National Economy Ruslan Dalenov said that amid worsening economic conditions in 2020, Kazakhstan’s GDP is expected to decline by 0.9%, LS reported. Asian Development Bank predicts negative economic growth in Kazakhstan The Asian Development Bank has revised its forecast for Kazakhstan’s economic growth in a negative direction. In April, the financial institute expected that the country's GDP growth in 2020 would decline to 1.8%, and in 2021 it would be 3.6%. “The forecast for the growth of the Central Asian economy was adjusted to minus 0.5%, which is lower than the April forecast for growth of 2.8% due to trade failures and low oil prices. A recovery to 4.2% is forecasted in 2021. Expectations growth for 2020 for Kazakhstan was revised downward from 1.8% to minus 1.2%, for 2021 from 3.6% to 3.4%. The inflation forecast in Kazakhstan was also adjusted from 6% to 7.9% for 2020 and from 5.7% to 6.2% for 2021,” the ADB said. In addition, inflation in developing countries in Asia, according to the expectations of bank analysts, this year will be at the level of 2.9% against 3.2% previously, which reflects a decrease in demand and lower oil prices. In 2021, it will decrease to 2.4%. 2 ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands According to World Bank forecasts, Kazakhstan’s GDP due to a pandemic in 2020 will decrease by 3%. Also, the financial institute calculated that the number of impoverished Kazakhstanis after a pandemic could increase by 820 thousand. The Minister of National Economy, Ruslan Dalenov, said that amid worsening economic conditions in 2020, Kazakhstan’s GDP is expected to decline by 0.9%. KMF receives a loan from the European Bank for Reconstruction and Development in the amount of $40 million Kazakhstan’s leading microfinance organisation, KMF microfinance organisation will be able to meet the urgent need of micro, small and medium-sized enterprises for liquidity due to the impact of the coronavirus pandemic, thanks to a local currency loan provided by the European Bank for Reconstruction and Development. A loan in Kazakhstani tenge, equivalent to $40 million, will help local enterprises continue their entrepreneurial activities and preserve jobs. The provision of funds in local currency will reduce the currency risks of borrowers. “Now we are witnessing an active recovery in the business of our customers. We note the high demand for this funding and are grateful to the EBRD for its active work in attracting investments to Kazakhstan that work to increase entrepreneurial activity, including among self-employed citizens,” Shalkar Zhusupov, Chairman of the Board of KMF, said. KMF has 14 branches and 111 branches throughout Kazakhstan and provides financial services to more than 225,000 customers across the country. The company has been a partner of the EBRD since 2005. To date, the EBRD has invested 8.5 billion euro in the economy of Kazakhstan through 273 projects, Kapital reported. Kazakhstan, EAEU trade turnover reaches $5.6 billion In January-April 2020, mutual trade between Kazakhstan and the EAEU countries amounted to $5.685 billion, the Statistics Committee of the National Economy Ministry reports. This amount is 9.3% less than in January-April 2019, including export – $1.606 billion (decreased by 16.5%), import – $4.079 billion (decreased by 6.1%). Trade turnover with Russia accounts for 92.6% of all Kazakhstan’s trade volume with the EAEU states, Kyrgyzstan – 3.9%, Belarus - 3.4% and Armenia - 0.1%, according to Inform.kz. Kazakhstan mulls investment tax credit An investment tax credit is proposed to be introduced in Kazakhstan, National Economy Minister Ruslan Dalenov told the plenary session of the Majilis. According to Dalenov, if introduced, an investment tax credit will be provided for three years. Such credits will be interest-free, but penalties are considered to be levied on overdue credits. The minister went on to say that regulations to lower the amount of value added tax had been offered to apply for cotton processing, production of yeast, confectionery products, sugar (produced from sugar beets) in order to boost production volume and agricultural processing. Local exporters will enjoy a simplified VAT refund, that is, 50% without inspection, 50% after inspection, the minister said. VAT exemptions are also to be received by manufacturers of vehicles and agricultural machinery so as to increase Kazakhstani content, according to Kazinform. Kazakhstan to revise Strategic Development Plan for 2025 The Kazakh government will update the Strategic Development Plan For 2025. The new document will incorporate a mechanism called the “institute of regulatory appeal.” This mechanism will allow entrepreneurs and business associations to cancel or suspend the decisions of central and local governmental bodies by filing a complaint. The Minister of National Economy Ruslan Dalenov announced this new pro-business measure during the June 23rd government meeting. 3 ECONOMIC NEWSLETTER, June 2020 Embassy of the Kingdom of the Netherlands “That is, decisions that interfere with business activity can be quickly reversed and corrected,” he said. The new agenda will reduce control and supervision. It will substitute scheduled inspections with enterprise diagnostics. According to the minister, the business diagnostics will be done “without liability and will reduce the number of scheduled inspections.” The government “will continue to improve financial measures for state support. The point of interaction with the opinion leaders of small and medium-sized enterprises (SMEs) will be strengthened,” Dalenov said. The government will also minimize requirements for licenses and permits to simplify market entry for new competitors. Businesses will be able to get all the state services they need virtually. The ministry estimates that the new plan will increase the share