Economic Newsletter on Kazakhstan |March 2020

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Economic Newsletter on Kazakhstan |March 2020 Economic Newsletter on Kazakhstan |March 2020 CONTENTS MACRO-ECONOMICS & FINANCE ......................................................................................2 ENERGY & NATURAL RESOURCES ......................................................................................7 TRANSPORT & COMMUNICATIONS................................................................................ 10 AGRICULTURE ................................................................................................................. 11 CONTACTS ...................................................................................................................... 17 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, March 2020 Embassy of the Kingdom of the Netherlands MACRO-ECONOMICS & FINANCE What cheap oil and coronavirus does with the economy of Kazakhstan Kazakhstan’s GDP in 2020 may not show growth or even decline. Such forecasts were made by economists. According to the managing director of the Centre for Applied Economics Research Olzhas Tuleuov, the country’s economic growth rate in 2020 will be minimal since 1998. “According to updated estimates of our centre, Kazakhstan’s GDP growth for the year may be near zero with a slight margin in the negative region, which will be the minimum indicator of economic growth in the country since 1998. Such dynamics in Kazakhstan’s real GDP will be based on preservation assumptions world oil prices at an average of $30 per barrel, the slowdown in global economic growth from last year's 2.9% to 1.0%, the decline in oil and gas condensate in the country within 84-86 million tons and weakened domestic consumer and investment activity,” Tuleuov said. In addition, the expert identified two factors that will affect the changed forecast for GDP growth. “We single out the main two factors, including the shocks of external demand for export products due to a decrease in economic activity in the countries the main trade partners of Kazakhstan, as well as the shock of domestic demand against the background of the implementation of quarantine measures,” the economist added. Tuleuov also called the conditions under which Kazakhstan’s GDP could show recovery in 2021. “It all depends on how quickly external demand can recover. So if the world economy returns to its growth path above 2-2.5%, and oil prices go above $50 per barrel, then economic growth in Kazakhstan in 2021 according to our preliminary forecasts, it will be able to develop in the range of 2-4%,” Tuleuov explained. Independent economist Alexander Yurin believes that if global hydrocarbon prices remain low and quarantine in Kazakhstan continues for several months, a recession may await the country’s economy. “In March, Kazakhstan’s economy faced two very serious shocks. With a fall in oil prices, Kazakhstan’s economy lost external revenues, and quarantine measures already hit the services and population’s income quite sensitively. So far it’s not clear how long the influence of these two factors will last. If both of them have a negative impact on the economy for several months, this could well lead to a recession," Yurin emphasised. In 2021, we can expect a recovery in GDP growth, but this is unlikely. “In the event that quarantine measures do not last too long and oil prices return to pre- crisis levels, next year we can even see an increased rate of GDP growth. However, the likelihood of this scenario is very small. A more probable situation is when economic growth of the current and future years will develop somewhere near the zero mark,” Yurin added. Finam analyst Sergei Drozdov also noted that a recession in the global economy could result from the first and second quarters. The dynamics of Kazakhstan’s GDP will depend on the actions of the authorities. “The fight against the epidemic of coronavirus, which closes industrial areas and cities, stops plants and factories, disrupts export-import supplies, has already damaged the global economy and, judging by everything, according to the results of the first and second quarters, global GDP will show recessionary indicators. The fall in energy demand looks quite justified against the background, and the price war unleashed by Saudi Arabia, after Russia’s refusal to join the OPEC+ deal, puts additional pressure on the price of oil. At this stage, given the ongoing hysteria around COVID-19, it’s very difficult to assess the loss of Kazakhstan’s GDP, the extent of which will depend not least on the actions of the authorities to protect their economy,” Drozdov explained. The Minister of National Economy Ruslan Dalenov said that the government will revise the forecast for the country’s GDP growth in 2020. Calculations will be made after the end of the first quarter, LS reported. 2 ECONOMIC NEWSLETTER, March 2020 Embassy of the Kingdom of the Netherlands Kazakh government adopts revised budget for 2020 The government of Kazakhstan has revised the 2020 budget which is now based on an assumed oil price of $20 per barrel and exchange rate of 440 tenge per $1, Minister of National Economy Ruslan Dalenov said, according to Kazinform. “The assumed oil price for April-December of this year is set at $20 per barrel, exchange rate at 440 tenge per $1 and annual inflation at 9-11%,” Dalenov said at a meeting of the government. The government approved on the revised economic forecast and budget for 2020. “Revenue to the government budget, exclusive of transfers, in 2020 is expected to come to 6.414 trillion tenge or 1.672 trillion tenge less than in the previous budget. The decrease will be due to a lower revenue from mineral resources, VAT and export duties on crude oil,” Dalenov said. The minister believes that exports will decrease by $16.3 billion to $35.1 billion. Imports will decline by $7.5 billion to $26.6 billion. “Expenditures of the government budget are projected at 14.27 trillion tenge or 1.356 tenge more than in the previously approved budget. The budget deficit is expected to be at 3.5% of GDP. Non-oil deficit will account for 10.8% of GDP,” the minister said. Also, the government will allocate 315.6 billion tenge to finance support measures following the review of the macroeconomic indicators, Finance Minister Alikhan Smailov said. “These funds will be used for indexation of all social allowances and coverage of expenses associated with the exchange rate fluctuation from April 1 of this year,” Smailov said. In addition, the government will allocate 293.3 billion tenge to support the population and economy, as well as finance the measures announced by the president, according to Smailov. Kazakh government allocated over 23 billion tenge from reserve for fight against coronavirus The Kazakh government has directed three tranches of funds totaling 23.467 billion tenge from its reserve at the fight against coronavirus, Minister of Information and Public Development Dauren Abayev has said. The money was used to fight the coronavirus and not to implement the anti-crisis measures announced by the President. “These funds were used to purchase medicines, medical devices and laboratory equipment, masks, gloves, protective suits and testing systems. Also, these are the costs of evacuation of citizens by the national emergency medicine coordination center, outfits for civil service employees, procurement of disinfectants etc.,” he said. The public fund Birgemiz (Together), established on the initiative of Kazakhstan’s First President Nursultan Nazarbayev on March 20, received more than 13 billion tenge in contributions. In addition, the Baiterek National Management Holding plans to raise more than 600 billion tenge at 6% per annum from the bond market for 12 years, Baiterek Holding CEO Aidar Arifkhanov said, according to zakon.kz. President Tokayev instructed to support SMEs with 600 billion tenge worth soft loans, some to be exempted from income tax President Tokayev instructed the National Bank to allocate 600 billion tenge ($1.3 billion) funds to support SMEs affected by coronavirus crisis. The SMEs will be provided with one- year soft loans at the interest rate of 8 %. Tokayev also added that with the increase in funding for the “Economic of Simple Things” program, the support for domestic business will amount to 1 trillion tenge. In addition, Deputy Prime Minister Yeraly Tugzhanov informed that around 70 thousand entrepreneurs will be exempted from 10% income tax until the end of the year, according to sputniknews.kz. Kazakhstan to spend 28 trillion tenge on healthcare till 2025 Kazakhstan will spend 28 trillion tenge on healthcare sector till 2025, according to Executive Secretary of the Ministry of Healthcare Botagoz Zhakselekeova. “In line with the 2020-2025 State Programme of Healthcare Development, till 2025 the total amount of expenses on healthcare sector is set to be raised to 5% of GDP. From 2019 to 2025, the amount of spending on healthcare will comprise 28 trillion tenge, 13 3 ECONOMIC NEWSLETTER, March 2020 Embassy of the Kingdom of the Netherlands trillion of which (or 47%) will be envisaged in the national budget. 3 trillion tenge (or 11%) will be spent from the Health Insurance Fund,
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