Kazakhstan: Staff Concluding Statement of the 2017 Article IV Mission
Kazakhstan continues to withstand challenges related to lower oil prices and slower growth in Russia, China and Europe. The authorities’ response – targeted fiscal support, exchange rate (ER) adjustment, strengthened domestic liquidity management, and structural reforms focusing on the business climate and public administration – has helped stabilize conditions. While growth slowed in 2016, a pickup is expected in 2017.
Growth in 2016 was positive, 1 percent, reflecting an increase in oil production and supportive policies, notably Nurly Zhol, which provided funding for infrastructure, SMEs, and housing. Actions of the National Bank (NBK) stabilized markets and restored confidence in the tenge. Inflation came down during the year, and NBK reserves increased by $2 billion, owing to strong financial inflows.
Growth is projected to reach 2.5 percent in 2017 and non-oil growth should reach 4 percent by 2021. This will reflect a further increase in oil production, the impact of structural reforms, and an unlocking of bank lending. The external current account is projected to improve with higher exports, and inflation should fall within the NBK target band of 6 to 8 percent in 2017. Uncertainty is significant, however, given dependency on commodity price developments.
The nonoil deficit should be reduced in the medium term, with higher non-oil revenues to support sufficient social and capital spending. Monetary policy should further strengthen the inflation-targeting framework, including ER flexibility. Financial sector weaknesses should be addressed promptly, and implementation of the ambitious structural reform agenda should be accelerated and better communicated.
Press-release at the IMF official web-site