Azernews.Az

By Kamila Aliyeva

The World Bank’s real GDP growth forecast for Kazakhstan in 2018 has been revised upward, from 2.6 to 3.7 percent, due to better-than-expected oil prices and output.

The real GDP growth rate of Kazakhstan in the first quarter of 2018 was approximately 4.1 percent, said the World Bank’s spring edition of the biannual Kazakhstan Economic Update published on May 31.

It was noted that real GDP growth accelerated from an annual average of slightly above 1 percent in 2015–16 to about 4 percent in 2017.

“The improvement in economic performance was mainly the result of an improved performance by the oil sector, as oil output was boosted from oil fields not included in OPEC-led cuts. Together with more favorable terms of trade, this generated positive spillover effects to the non-oil manufacturing and services sectors,” the WB analysts believe.

On the demand side, an improvement in net exports was a key contributor to the higher rate of GDP growth. This resulted in an improvement in the current account balance and more fiscal revenue flowing to the Oil Fund, according to the bank.

“Consequently, the tenge continued strengthening in real terms. Meanwhile, domestic demand remained subdued, leading to a moderation in inflation,” the report said.

The World Bank reviewed real GDP growth forecast for 2018 due to better-than-expected oil prices and output.

“Over the medium-term, the real GDP growth rate is expected to hover around 3 percent, as the contribution of the oil sector to economic growth declines relative to 2017–18 (when a structural shift in oil output occurred),” the bank said.

With oil prices projected to reach $65 per barrel on average in 2018–2020, the current account balance is also projected to improve, from deficits in 2015–2017 to surpluses in 2018–2020, according to the WB analysts. The fiscal position will improve gradually in the wake of fiscal consolidation efforts.

The WB considers that downside risks to the outlook include a potential weakening of the external environment (driven by mounting geopolitical tensions), a worsening of problems in the banking sector, and a slowdown in the implementation of the necessary structural reforms.

The successful implementation of structural reforms will be required to deliver more sustainable and inclusive economic growth going forward, according to the bank.

“Ongoing structural and institutional reforms should aim to transform the current oil-driven and state-run growth model—by reducing the role of the state in the economy—to one that facilitates the development of a vibrant, modern and innovative tradable non-oil sector,” the report said.

In this context, efforts to restructure and privatize state-owned enterprises would be expected to focus on improving the efficiency of public administration, reducing fiscal risks, and opening competitive spaces for the private sector, according to the WB analysts.

“Prudent fiscal and monetary policies would support economic and price stability and encourage investment in the non-oil economy,” the report noted

The World Bank pointed out that attracting and retaining more export-oriented and efficiency-seeking investment would be critical for economic transformation.

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Kamila Aliyeva is AzerNews’ staff journalist, follow her on Twitter: @Kami_Aliyeva

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