Publication: Monitor Volume: 7 Issue: 45

The National Bank of Kazakhstan (NBK) has estimated that Kazakhstan’s economy will grow at least 4 percent this year, but acknowledges that growth might be more rapid. Moreover, the NBK expects the economy to expand without IMF and World Bank assistance. This underscores both Kazakhstan’s solid growth prospects and the shrinking role of multilateral lenders in the CIS.

Kazakhstan’s GDP growth in 2000 has been reported as a sizeable 9.6 percent, but the boost to exports and the industrial sector from last year’s sharp rise in commodity prices is unlikely to be repeated in 2001. Foreign direct investment (FDI), however, is expected to continue to be a major impetus to growth. FDI increased rose 34 percent in the first nine months of 2000 to US$1.8 billion. Two-thirds of this investment was directed toward the energy sector (Russian agencies, February 20). This growth is expected to continue in 2001.

To help boost growth even further in 2001, the NBK cut its key refinance rate to 12.5 percent from 14.0 percent in late February (Reuters, February 21). Bank lending is likely to rise in 2001, thanks to an increasingly dynamic financial sector in which foreign-owned banks are playing a growing role. The rate cut shows that inflation does not seem to be worrying the NBK. Consumer price inflation has been slowing this year: After rising sharply in the second half of 2000, the year-on-year rate of consumer price inflation dropped 9.0 percent in February. This is below the average inflation rate of 9.8 percent in 2000. Strong economic growth also helped lower the unemployment rate to 12.8 percent at the end of 2000, down from 13.5 percent a year earlier (Russian agencies, February 6).

Because many other economic indicators are also favorable in Kazakhstan at the moment, GDP growth in 2000 could easily exceed the 4 percent forecast by the NBK. On the other hand, the economy remains highly vulnerable to a downturn in oil and other commodity prices and a potential slowdown in Russia.