Economy of Kazakhstan
Economy - overview: Kazakhstan, the second largest of the former Soviet republics in territory, possesses enormous untapped fossil fuels reserves as well as plentiful supplies of other minerals and metals. It also has considerable agricultural potential with its vast steppe lands accommodating both livestock and grain production. The mountains in the south are important for apples and walnuts; both species grow wild there. Kazakhstan's industrial sector rests on the extraction and processing of these natural resources and also on a relatively large machine building sector specializing in construction equipment, tractors, agricultural machinery, and some military items. The breakup of the USSR and the collapse of demand for Kazakhstan's traditional heavy industry products have resulted in a sharp contraction of the economy since 1991, with the steepest annual decline occurring in 1994. In 1995-97 the pace of the government program of economic reform and privatization quickened, resulting in a substantial shifting of assets into the private sector. The December 1996 signing of the Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan's Tengiz Field to the Black Sea increases prospects for substantially larger oil exports in several years. Kazakhstan's economy turned downward in 1998 with a 2.5% decline in GDP growth due to slumping oil prices and the August financial crisis in Russia. A bright spot in 1999 was the recovery of international oil prices, which, combined with a well-timed tenge devaluation and a bumper grain harvest, pulled the economy out of recession.
Economy - in greater depth
Kazakhstan's monetary policy has been well-managed. Its principal challenges in 2001 are to manage strong foreign currency inflows without sparking inflation. inflation has, in fact, stayed under control, registering 9.8% in 2000, and appears likely to be under 10% in 2001. Because of its strong economic performance and financial health, Kazakhstan became the first former Soviet republic to repay all of its debt to the IMF by paying back $400 million in 2000; 7 years ahead of schedule. Overall foreign debt is about $12.5 billion, $4 billion of which is owed by the government. This amounts to 69% of GDP, well within manageable levels.
The upturn in economic growth, combined with the results of earlier tax and financial sector reforms, dramatically improved government finances from the 1998 budget deficit level of 4.2% of GDP to a slight surplus in 2000. Government tax revenues grew from 16.4% of GDP in 1999 to 20.6% of GDP in 2000. In 2000, Kazakhstan adopted a new Tax Code in an effort to consolidate these gains. Its strong financial position also allowed the government to reduce the value-added tax (VAT) from 20% to 16% and reduce social (payroll) taxes as of July 2001. Kazakhstan's stronger budget position and strong export earnings earned it credit ratings upgrades from Moody's, S&P, and Fitch IBCA during 2001.
Oil and gas is the leading economic sector. In 2000, Kazakhstan produced 35.252 million metric tons of oil (700,000 barrels/day), a 17.4% increase over 1999's 30.025 million tons. It exported 28.883 million tons of oil in 2000, up 38.8% from 20.813 million tons in 1999. Production in 2001 has been growing at roughly 20%, on target to meet the government's forecast of 40.1 million tons of oil (800,000 barrels/day). In 2000, production reached 11.5 km² of natural gas, up from 8.2 km² in 1999.
Kazakhstan has the potential to be a world-class oil exporter in the medium term. The landmark foreign investment in Kazakhstan is the TengizChevroil joint venture, owned 50% by ChevronTexaco, 25% by ExxonMobil, 20% by the Government of Kazakhstan, and 5% by Lukarco of Russia. The Karachaganak gas and gas condensate field is being developed by BG, Agip, ChevronTexaco, and Lukoil. The Agip-led Offshore Kazakhstan Consortium has discovered a potentially huge oil field, Kashagan, in the northern Caspian. Kazakhstan's economic future is linked to oil and gas development. GDP growth will depend on the price of oil, as well as the ability to develop new deposits.
Kazakhstan instituted an ambitious pension reform program in 1998. By July 2001, Kazakhstanis had contributed more than $1 billion to their own personal pension accounts, most of which is managed by the private sector. The National Bank oversees and regulates the pension funds. The pension funds' growing demand for quality investment outlets triggered rapid development of the debt securities market. Pension fund capital is being invested almost exclusively in corporate and government bonds, including Government of Kazakhstan Eurobonds. The Kazakhstani banking system is developing rapidly. Banking systems capitalization now exceeds $1 billion. The National Bank has introduced deposit insurance in its campaign to strengthen the banking sector. Several major foreign banks have branches in Kazakhstan, including ABN-AMRO, Citibank, and HSBC.
GDP: purchasing power parity - $54.5 billion (1999 est.)
GDP -growth rate: 9.6% (1999 est.)
GDP - per capita: purchasing power parity - $3,200 (1999 est.)
GDP - composition by sector:
Population below poverty line: 35% (1999 est.)
Household income or consumption by percentage share:
Inflation rate (consumer prices): 8.3% (1999 est.)
Labor force: 8.8 million (1997)
Labor force - by occupation: industry 27%, agriculture and forestry 23%, other 50% (1996)
Unemployment rate: 13.7% (1998 est.)
Industries: oil, coal, iron ore, manganese, chromite, lead, zinc, copper, titanium, bauxite, gold, silver, phosphates, sulfur, iron and steel, nonferrous metal, tractors and other agricultural machinery, electric motors, construction materials
Industrial production growth rate: 2.2% (1998 est.)
Electricity - production: 49,299 GWh (1998)
Electricity - production by source:
Electricity - consumption: 48,822 GWh (1998)
Electricity - exports: 400 GWh (1998)
Electricity - imports: 3,374 GWh (1998)
Agriculture - products: grain (mostly spring wheat), cotton; wool, livestock
Exports: $5.2 billion (1999 est.)
Exports - commodities: oil 40%, ferrous and nonferrous metals, machinery, chemicals, grain, wool, meat, coal
Exports - partners: EU 32%, China 29%, Russia 29% (1998)
Imports: $4.8 billion (1999 est.)
Imports - commodities: machinery and parts, industrial materials, oil and gas, vehicles
Imports - partners: Russia 39%, Ukraine, US, Uzbekistan, Turkey, UK, Germany, South Korea (1998)
Debt - external: $7.9 billion (1999 est.)
Economic aid - recipient: $409.6 million (1995)
Currency: 1 Kazakhstani tenge = 100 tiyn
Exchange rates: tenges per US$1 - 139.02 (January 2000), 119.52 (1999), 78.30 (1998), 75.44 (1997), 67.30 (1996), 60.95 (1995)
Fiscal year: calendar year