Country Report Kazakhstan April 2009

Outlook for 2009-10

• The president, Nursultan Nazarbayev, is expected to stay in power in 2009-10, but he could face growing dissatisfaction with his rule as economic growth slows and household incomes fall.
• The role of the state in the economy is set to increase under the government's Action Plan for 2009-10 as the authorities attempt to combat liquidity problems in the banking sector and slowing GDP growth.
• With oil prices set to weaken sharply, the Economist Intelligence Unit expects the economy to contract by 0.2% in real terms in 2009. A pick-up in oil prices will result in a return to positive growth, of 2%, in 2010.
• Average annual consumer price inflation is expected to decelerate from 17% in 2008 to around 7.3% in 2009-10, owing to much weaker global commodity prices and slower credit growth than in recent years.
• With economic growth slowing and export competitiveness coming under threat, there is a risk of speculative attacks against the tenge, forcing the authorities to oversee another devaluation of the currency.
• Although import costs are forecast to fall in 2009, owing to weak domestic demand, low oil-related export revenue will push the current account into deficit. The deficit will narrow in 2010, owing to a pick-up in oil prices.

Monthly review

• Opposition parties have sought to capitalise on growing public dissatisfaction in the face of the financial crisis, calling for the dismissal of the government and dissolution of parliament, to be followed by an early election.
• The president's political adviser has spoken in favour of a pre-term election, warning that if the economic crisis were to continue into 2011, this could make it more difficult for the ruling Nur Otan to win a clear majority.
• Mr Nazarbayev has announced a new economic stimulus package, to be funded by commodity sales. This brings the government's planned total assistance to the economy in 2009-10 to almost Tenge3trn (US$20bn).
• The government is revising its 2009-11 budget to take account of the devaluation of the tenge, which since mid-February 2009 has traded at around Tenge150:US$1, down from a 2008 average rate of Tenge120:US$1.
• Data from the Statistics Agency of the Republic of Kazakhstan (SARK) show that the rate of unemployment rose from a post-independence low of 6.3% in August 2008 to 7.1% in February 2009.
• Year-on-year disinflation stalled in February 2009. Consumer prices were up by 8.7%, unchanged from the rate in January.