Photo courtesy of minplan.gov.kzThe ongoing crisis in Ukraine and the slowdown of the Russian economy pose risks to the Kazakh economy, Tengrinews reports citing the Minister of Economy and Budget Planning Yerbolat Dossayev.
"Taking into account the domestic and foreign trends of the first five months of this year, we believe that the main risks to Kazakhstan's economy are posed by the poor growth rate of industrial production in Kazakhstan, slowdown of the investment activities as compared to last year, acceleration of the inflation, high levels of non-performing loans amounting to 33.7 percent (of the banks' portfolios) that hinders lending to the real sector of the economy, the crisis in Ukraine and a significant slowdown of the Russian economy," Dossayev said at the press-briefing on June 17.
According to Dossayev, the failure to achieve the goods output target resulted from suspension of oil production at the Kashagan field, poor competitiveness of Kazakhstan-made chemical products at the foreign markets, suspension of Zhezkazgan Smelter for reconstruction and unfavorable market prices of some of the metals that Kazakhstan exports.
"Failure to achieve any growth in producing services is primarily due to the low growth rates of the industrial sector, as most of the service companies are closely interrelated and depend on the backbone industrial enterprises," Dossayev said.
Kazakhstan's economy grew by 4.1 percent in January-May 2014. “Despite the 10 percent decline in the metals price index, the Tenge exchange rate adjustment (devaluation by 19%) had a positive impact on Kazakhstan's foreign trade. The average price of Brent crude oil in January-May this year was $108.2 per barrel. One of the main reasons for the decline in metals prices is the slowing economic growth pace and weakening of manufacturing activity in China.
"Exports of goods in the first quarter amounted to $22.6 billion and increased by 11 percent (against Q1 2013), whereas in the same period of 2013 it declined by 1.6 percent (against Q1 of the pervious year),” Dossayev said.
Dossayev emphasized that the February exchange rate adjustment by 19% enabled Kazakhstan to boost its gross international reserves. As of June 1 they amounted to $103.4 billion. Moreover, the National Fund's assets increased by 7.1 percent and reached $75.8 billion. The gold reserves increased by 11.7 percent to the mark of $27.6 billion.
The analysis of Kazakhstan' progress made by the Minister sounds in accord with the recent conclusions of Standard & Poor's. However the agency viewed the developments as a ground solid enough to revise its forecasts and changed Kazakhstan’s credit-rating outlook from “stable” to “negative”. S&P predicted a decline in Kazakhstan GDP growth to 4.5% due to reduced volumes of oil production, slowdown of the Russian economy and complications in the Kazakh monetary policies