NUR-SULTAN

Kazakhstan expects foreign direct investment (FDI) to rise by 11 percent year-on-year to $19 billion in 2021 as global capital market recover and the country’s economy becomes increasingly attractive to investors, Asset Irgaliyev, the economy minister said.

The vast country, which has a relatively small population, attracts about 60 percent of all capital invested in the five former Soviet Central Asian states.

Foreign energy majors poured into the country in the 1990s, mainly attracted by Kazakhstan’s oil fields. Of the $150 billion in foreign investment in the Central Asian country since its independence, $120 billion, more than 70 percent, has been in natural resources extraction.

But the country has been also trying for several years to get off the “oil needle” – and diversify its economy.

Kazakhstan’s position as a huge territory, situated between the largest markets of Western Europe, East Asia and the Middle East, also make it an ideal transport and logistics corridor. Goods coming from China to Europe through Kazakhstan can be transported 3-4 times faster than by sea ​​routes.

Renewable energy is a new priority industry. Over the past two years, the total contribution from renewables has doubled, reaching three percent of total energy output.

Irgaliyev told the government meeting that investment indicators for the first four months of the year were promising, with the volume of FDI in fixed assets, excluding the mining industry, showing an increase of 32.3 percent year-on-year.

He said that investments in fixed assets in the manufacturing industry rose 112.8 percent year-on-year in January-April, agriculture – 66.1 percent, construction – 72.4 percent, trade – 28.3 percent, transport and warehousing – 27.6 percent, financial and insurance – 28.6 percent.

One of the most significant factors in the recovery of the national economy was the performance of the service sector, where positive dynamics had been monitored for the first time in the last 12 months, the minister said.

In April, Kazakhstan revised its economic growth forecast for 2021 upwards to 3.1 percent, from a previous projection of 2.8 percent, as macroeconomic indicators improved in the first quarter. It also revised its 2021 budget and increased spending by 1.3 trillion tenge ($3 billion) to 15.3 trillion tenge to further boost growth.

The Central Asian economy contracted 1.6 percent in the first quarter of this year, after shrinking 2.9 percent in January-February. The government forecast it would contract by 4.5 percent in the first three months.

Economists predict that growth will rebound in Kazakhstan as the effects of the pandemic abate and government support measures kick in. The International Monetary Fund said last month that Kazakhstan’s GDP was forecast to grow 3.2 percent in 2021 and 4.0 percent in 2022. Annual inflation is projected at 6.4 percent this year and 5 percent in 2022.

And according to the World Bank’s latest projections, the country’s economic growth is expected to accelerate in 2021, driven by the resumption of domestic activity, recovery in global demand for oil, continued fiscal support measures, and a successful national inoculation programme against the COVID-19 virus. With this continued pace of recovery, the economy is expected to grow within the 3-4 percent range in 2021, and 3.5 percent in 2022.