The World Bank (WB) forecasts that Kazakhstan’s GDP growth rate will fall from 1.2 percent in 2015 to just 0.1 percent in 2016, according to the WB’s Impact of China on Europe and Central Asia report.
The inflation is expected to remain elevated, according to the report.
These projections are based on the current 2016 oil price forecast of $37 per barrel, and no major improvement in external conditions is anticipated over the near term, said the report.
The current-account deficit is expected to worsen as the economy continues to adjust to low oil prices. Consumer price inflation is projected to peak in 2016 before falling back to single digits by the end of the year as the effect of Kazakh tenge’s depreciation on domestic prices fades.
Nevertheless, consumer prices are expected to rise by an average of about 13.7 percent over the year, according to the report.
Kazakhstan’s GDP growth is projected to pick up to about 1.9 percent in 2017 and 3.7 percent in 2018, assuming that average oil prices will recover to $48 per barrel in 2017 and $51.4 per barrel in 2018 and that the Kashagan offshore oilfield will commence production on schedule.
Rising oil output and an improving external environment are expected to contribute to a broad-based economic recovery in Kazakhstan, starting with the oil sector and related services. However, sustaining higher growth rates will depend on implementation of structural reforms designed to support private-sector development and economic diversification.
Kazakhstan’s economic outlook is vulnerable to three main sources of downside risk, according to the WB. First, oil prices may fall below the baseline projection of $37 per barrel. Second, progress on the structural reform agenda to support diversification may stall, especially the privatization of state-owned enterprises and key revisions to the regulatory framework. And third, insufficient coordination between macroeconomic policies and structural reforms may adversely affect the quality of growth and its contribution to job creation, which could have negative welfare implications, particularly for poor households.