OIL PIPELINE TO OPEN IN AUGUST.

Kazakhstan is in the midst of an economic boom. In 2000, GDP growth ran 9.6 percent, benefiting from a 14.6 percent increase in industrial output. Rapid growth is continuing this year. In the first quarter, GDP surged 11.0 percent as industrial output jumped 11.1 percent over the same period of last year. Retail sales rose 12.9 percent. The jump in output has much to do with oil. Kazakhstan produced 30.6 million metric tons (mmt) of oil in 2000, also a 14.6 percent increase over the previous year.

The increase in oil production has been key to the rise in GDP. Oil output has risen 19.3 percent in the first four months of the year, an increase made possible by the opening of the new pipeline to Novorossiisk, the existing pipeline from Kazakhstan’s Tengiz fields having been full for a number of years. The high cost of shipping oil by rail and over the Caspian by barge has been expensive for both producers and the Kazakh government. Costs and capacity constraints had limited oil output. With the opening of the new pipeline, however, oil output is destined to rise sharply, contributing to substantial further growth in Kazakhstan’s GDP this year.

GDP growth in 2001 will also benefit from a rebound in agriculture. Kazakhstan has a much more diverse economy than Azerbaijan, the other major Central Asian oil exporter in the CIS. Agriculture contributes 9.8 percent to GDP, in large part due to output from the “virgin lands” area in the north of the country. Last year, agricultural output fell 3.3 percent thanks to drought and other problems in the agricultural sector. This year, weather conditions are more favorable, providing for a better harvest. The improved harvest, in turn, will raise farm incomes in impoverished, Slavic areas of the north, boosting GDP growth and raising living standards for families that do not benefit from the oil sector bonanza. (CIS Statistical Bulletin, #7, April 2001.)

EXCHANGE RATE STABILITY PULLS DOWN KAZAKH INFLATION.