RAPID KAZAKH GROWTH CONTINUES INTO THE THIRD QUARTER.

According to Kazakh President Nursultan Nazarbaev, GDP grew by over 10 percent in the first nine months of 2000 (Reuters, October 2). Booming exports of oil and metals with higher international prices for these commodities have been a boon to overall growth. GDP growth this year compares with 1.7 percent growth for all of 1999 and a 1.9 percent drop in 1998. While industry, which was up 16 percent in the January-September 2000 period, has benefited from the surge in exports (and the devaluation of the tenge last year), other sectors of the economy such as transportation and construction are pushing growth higher as well. Whereas GDP was up 9.2 percent in the first quarter, transportation surged 22.1 percent and construction was 29.9 percent higher. Transportation is being pushed higher in large part by the higher volumes of commodity exports. Construction is boosted by the investment in several infrastructure projects particularly the building boom in the capital, Astana. While value-added in industry accounted for 25.6 percent of total 1999 GDP, transportation comprised 11.3 percent of total GDP and construction 4.8 percent. Retail trade, also an important component of GDP (15.0 percent of total 1999 GDP), increased 7.0 percent in the first quarter of 2000 as personal consumption revived this year (TACIS, May 2000).

While strong growth in the first half of 2000 was assisted by sizeable drops in GDP in the first half of 1999 (GDP was down 3.6 percent in the first quarter and 3.5 percent in the second quarter of 1999 after the Russian financial crisis in August 1998), continued high growth into the third quarter of 2000 shows just how strong the economic recovery is. Growth remains, however, highly vulnerable to a downturn in international commodity prices or in the Russian economy to which it is still strongly tied. This year’s growth is also expected to suffer very slightly from a weaker harvest; agriculture accounted for 9.9 percent of 1999 GDP.

What is not factored in official GDP figures is the shadow economy which according to the economics minister accounts for between 20 to 28 percent of Kazakhstan’s GDP. The shadow economy consists of illegal and unofficial businesses as well as the use of double-entry bookkeeping whereby companies keep one set of books for themselves and another set to show to tax inspectors and other government officials (Russian agencies, May 29). High tax rates, an excessively punitive tax code and corruption among fiscal authorities helps spur such practices.

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