Not all recent economic news from Central Asia is unpleasant, however. As is the case in Russia, economic growth in Kazakhstan appears to have accelerated rapidly in the first quarter of 2000.
Kazakhstan is benefiting from higher international commodities prices, better export performance resulting from the devaluation of the tenge in April 1999, and strong import growth in Russia, Kazakhstan’s largest trading partner. As a result, the government estimates first-quarter GDP growth at a whopping 7-8 percent. Industrial output is estimated to have increased 15.2 percent, while agricultural output was 5.1 percent higher. Energy production helped boost industry: oil production was up 16 percent in the first quarter, while natural gas production rose 32 percent. Output from other mining operations (which also benefited from high prices) rose substantially: The extraction of iron ore and non-ferrous metals was up 180 percent 16 percent, respectively (Russian agencies, April 15, 17, 18).
Much of this output growth was due to Kazakhstan’s trade trends. Exports nearly doubled during the first two months of 2000 (to US$1.25 billion), while imports declined slightly to US$580 million. Kazakhstan’s US$672 million trade surplus during January-February contrasts sharply with the US$19 million deficit recorded during the same period last year (Reuters, April 18). Exports are benefiting not only from the increased output growth but also from much higher world prices and a weaker currency. Commodities account now for over 90 percent of total Kazakh exports.
These trends should make Kazakhstan more attractive for foreign investors. Foreign direct investment was officially reported up 30 percent in the first quarter (Russian agencies, April 18). However, the government’s recent dispute with Belgium’s Tractebel–which posted losses on its operation of Kazakhstan’s gas and electricity infrastructure during the last three years and is now seeking to leave the country–may give some investors pause. However, the government is seeking an amicable resolution to the Tractebel dispute, including a possible buyout by Russia’s Gazprom. It has also cancelled oil export quotas imposed in late 1999 (Russian agencies, April 14). This shows that Kazakhstan remains Central Asia’s most investment-friendly country.
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