The commodity-dependent Kazakh economy experienced one of its toughest years in 2016 as a result of low oil and other commodity prices together with a slowdown in major trading partners China, Russia and the EU.
Following the plunge in oil prices, the Kazakh economic growth eased sharply from 4.2% in 2014 to 1.2% in 2015 and 1% in 2016. While growth was originally expected by the government to slow down to 0.5% in 2016, it was boosted by an increase in oil production thanks to the launch of the giant Kashagan oilfield at end October.
But after nearly two years of economic slowdown, Kazakhstan has widely turned the corner in 2017. Kazakh’s GDP growth notably improved, climbing 4.2% y/y in the first half of 2017. The growth was mainly driven by high rates in the mining sector, oil output and coal production.
Following OPEC’s push to raise world oil prices, the hydrocarbon-reliant Central Asian country’s growth is mainly contingent on gradually ramping up its oil production to its previous levels.
Continued acceleration in growth is expected to be driven by the impact of structural reforms focused on the business climate and public administration and an unlocking of bank lending.
Bankers expect exports to continue improving thanks to the Kashagan oil project which finally resumed its operations in October, as export revenues from the field will support the balance of payments. Sberbank projects a current account deficit of $1.5bn deficit in 2017, based on the assumption of a mild rise in oil prices.
In 2016, crude oil production in Kazakhstan fell by 1.4% y/y to 65.5mn tonnes, while gas condensate production amounted to 12.4mn tonnes, giving a total of 78mn tonnes. Kashagan oil field’s recommencement should allow Kazakhstan to raise oil output by an additional 4-7mn tonnes in 2017 from 2016's level.
Kazakhstan is hoping to raise annual economic growth to 5.5% by 2021. Economy Minister Timur Suleimenov predicted in a March 2 interview with Reuters that higher-than-expected oil prices may push Kazakh GDP growth to 2.8% this year, above the government’s recently updated forecast of 2.5%.
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