Economy of Kazakhstan

Economy of Kazakhstan

From Wikipedia, the free encyclopedia

Kazakhstan is the largest nation and economy in Central Asia, and the ninth largest nation by area in the world. It possesses enormous fossil fuel reserves as well as minerals and metals. It also has considerable agricultural potential with its vast steppe lands accommodating both livestock and grain production, as well as developed space infrastructure, which took over all launches to the International Space Station from the Space Shuttle. The mountains in the south are important for apples and walnuts; both species grow wild there. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources and also on a relatively large machine building sector specializing in construction equipment, tractors, agricultural machinery, and some military items. The breakup of the USSR and the collapse of demand for Kazakhstan's traditional heavy industry products have resulted in a sharp contraction of the economy since 1991, with the steepest annual decline occurring in 1994. In 1995-97 the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector. The December 1996 signing of the Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan's Tengiz Field to the Black Sea increases prospects for substantially larger oil exports in several years. Kazakhstan's economy turned downward in 1998 with a 2.5% decline in GDP growth due to slumping oil prices and the August financial crisis in Russia. A bright spot in 1999 was the recovery of international petroleum prices, which, combined with a well-timed tenge devaluation and a bumper grain harvest, pulled the economy out of recession.

Current GDP per capita shrank by 26% in the Nineties. However since 2000, Kazakhstan's economy grew sharply, aided by increased prices on world markets for Kazakhstan's leading exports--oil, metals and grain. GDP grew 9.6% in 2000, up from 1.7% in 1999. Since 2001, GDP has been among the highest in the world. In 2006, extremely high GDP growth had been sustained, and grew by 10.6%.^[5]. Business with booming Russia and China, as well as neighboring CIS nations have helped to propel this amazing growth. The increased economic growth also led to a turn-around in government finances, with the budget moving from a cash deficit of 3.7% of GDP in 1999 to 0.1% surplus in 2000.

Macro-economic trend

This is a chart of trend of gross domestic product of Kazakhstan at market prices estimated by the International Monetary Fund with figures in millions of Kazakhstani Tenges.

For purchasing power parity comparisons, the US Dollar is exchanged at 59.95 Tenges only.

Kazakhstan's monetary policy has been well-managed. Its principal challenges in 2001 are to manage strong foreign currency inflows without sparking inflation. Inflation has, in fact, stayed under control, registering 9.8% in 2000, and appears likely to be under 10% in 2001. Because of its strong economic performance and financial health, Kazakhstan became the first former Soviet republic to repay all of its debt to the IMF by paying back $400 million in 2000; 7 years ahead of schedule. Overall foreign debt is about $12.5 billion, $4 billion of which is owed by the government. This amounts to 69% of GDP, well within manageable levels.

The upturn in economic growth, combined with the results of earlier tax and financial sector reforms, dramatically improved government finances from the 1998 budget deficit level of 4.2% of GDP to a slight surplus in 2000. Government tax revenues grew from 16.4% of GDP in 1999 to 20.6% of GDP in 2000. In 2000, Kazakhstan adopted a new Tax Code in an effort to consolidate these gains. Its strong financial position also allowed the government to reduce the value-added tax (VAT) from 20% to 16% and reduce social (payroll) taxes as of July 2001. Kazakhstan's stronger budget position and strong export earnings earned it credit ratings upgrades from Moody's, S&P, and Fitch during 2001.

Kazakhstan instituted an ambitious pension reform program in 1998. By July 2001, Kazakhstanis had contributed more than $1 billion to their own personal pension accounts, most of which is managed by the private sector. The National Bank oversees and regulates the pension funds. The pension funds' growing demand for quality investment outlets triggered rapid development of the debt securities market. Pension fund capital is being invested almost exclusively in corporate and government bonds, including Government of Kazakhstan Eurobonds. The Kazakhstani banking system is developing rapidly. Banking systems capitalization now exceeds $1 billion. The National Bank has introduced deposit insurance in its campaign to strengthen the banking sector. Several major foreign banks have branches in Kazakhstan, including ABN AMRO, Citibank, and HSBC. Kazakhstan is also a member of the Economic Cooperation Organization (ECO).

Mining