Astana is slashing growth expectations and cutting its budget revenue forecasts as Kazakhstan eyes its gloomiest economic outlook for years, sources in parliament report.
The government intends to cut this year’s GDP growth forecast to 1.5 percent (against its previous forecast of 4.8 percent) and reduce budget spending by a whopping $7 billion, sources in the ruling Nur Otan party told Vlast.kz following a presentation to parliament by National Economy Minister Yerbolat Dosayev on January 16.
Such growth would represent a significant slowdown on last year’s 4.3 percent, and would be Kazakhstan’s lowest since 2009, the height of the global credit crunch.
As President Nursultan Nazarbayev acknowledged last week, Kazakhstan is facing a litany of economic problems, from low prices for oil and metallurgical output to the knock-on effect of Western sanctions against Russia and pressures on the tenge as a result of the ruble’s precipitous fall.
The government is cutting the oil price on which its budget is based from $80 to $50 in its revised budget (which will have to be approved by parliament), Dosayev confirmed, after global prices dipped below $50 this month.
The slump in international prices is a major headache in Kazakhstan, where oil accounts for 25 percent of GDP and 60 percent of the balance of payments.
Meanwhile, the fall in value of the Russian ruble continues to exert pressure on Kazakhstan’s tenge, causing fears of an impending devaluation, which the National Bank insistently denies. There will be no “sharp fluctuations” of the currency in 2015, its chairman, Kayrat Kelimbetov, promised on January 15. But he made similar pledges before last year’s devaluation, and analysts remain convinced that economic logic dictates that another is only a matter of time.
The economic doom and gloom makes budget spending cuts inevitable, althought the size and specifics of any planned cuts have not yet been made public. Nur Otan sources quoted Dosayev as saying budget revenue would fall 1 trillion tenge (some $5.5 billion) short of forecasts in the previously approved budget.
The public will have to tighten its belt, Nazarbayev warned, ordering the government to explain to the people “that we have begun economizing on everything.”
The president has pledged over and over to ring fence social spending. But he cautioned last week that it must be targeted at those truly in need, since “the state is not a cash cow.”
Nazarbayev also ordered his government to freeze some unspecified infrastructure construction projects, although infrastructure building is one of the central pillars of the administration’s flagship new economic strategy, Nurly Zhol. That program contains a stimulus package of $9 billion in cash injections over three years taken from Kazakhstan’s oil fund. But that figure is starting to look like a drop in the ocean given the scale of the economic setbacks.
Editor's Note: Figures for budget revenue and spending have been corrected in this story.