NUR-SULTAN

Kazakhstan’s economy returned to growth in the first half of 2021 after months of contraction supported by the strong performance in manufacturing, pharmaceuticals, construction and the production of construction materials.

The Central Asian’s country’s Gross Domestic Product (GDP) grew by 2.3 percent year-on-year in January-June, the National Statistics Bureau said, after a contraction of 1.4 percent in the first quarter. Construction rose by 11.9 percent, boosted by the new opportunity to finance housing construction from surplus pension savings, agriculture – by 3.2 percent, manufacturing – by 2.9 percent.

The International Monetary Fund said in April that Kazakhstan’s GDP was projected to grow 3.2 percent in 2021 and 4.0 percent in 2022. Annual inflation is projected at 6.4 percent this year and 5.0 percent in 2022.

According to the World Bank’s latest projections, the country’s economic growth is expected to rebound in 2021, driven by the resumption of domestic activity, recovery in global demand for oil, continued fiscal support measures, and a successful national inoculation against the COVID-19 virus.

With the continued pace of recovery, the economy is expected to grow within the 3.0-4.0 percent range in 2021 and 3.5 percent in 2022.

In July, Asian Development Bank revised Kazakhstan’s economic outlook forecast upwards to 3.4 percent from 3.2 percent in 2021 after consumer spending showed a marked recovery as retail turnover expanded by 6.2 percent in January to April.

Machinery, building materials, light industry, and construction rose by 7.2 percent, and investment outside of the country’s large extractive industry jumped by 25.5 percent in the first five months. In the first quarter, real household income per capita grew by 3.4 percent on higher salaries and government spending on pensions and scholarships.

In May, the government announced additional fiscal support for economic recovery programmes.

“Factors likely to support growth in the coming months are the lifting of pandemic restrictions, higher oil prices, and the relaxation of OPEC+ oil production cuts agreed by the Organisation of the Petroleum Exporting Countries (OPEC) and its partners,” the ADB said.

Kazakhstan will increase oil production to 1.491 million barrels per day (bpd) from August, adding 16,000 barrels every month as OPEC+ participants agreed on a gradual rise in oil output, ending discussions that lasted around three weeks due to a confrontation between the UAE and Saudi Arabia.

As the COVID-19 pandemic disrupted production as well as demand for oil, OPEC+, a group of OPEC countries and allied producers of which ex-Soviet Kazakhstan is a member, cut output by a little more than 7 million bpd to support prices and reduce oversupply. Earlier this year, members of the group agreed to ease cuts gradually by 350,000 bpd in May, another 350,000 bpd in June and around 450,000 bpd in July.

The cartel has now decided to increase production by a cumulative 400,000 bpd every month starting in August until it reaches the same production levels seen at the end of 2019.

The ADB said that Kazakhstan’s 2022 growth forecast would stay at 3.5 percent.