Kazakhstan: Economy shows feeble growth in H1 2016
August 19, 2016
A drop in oil prices and a deeper recession in Russia have taken a heavy toll on Kazakhstan’s economy. GDP increased 0.1% on an annual basis in the first half of this year, according to a preliminary estimate released by Statistics Agency of the Republic of Kazakhstan (SARK). The reading was only a fraction of the 1.7% expansion in the first half of 2015. Kazakhstan reports growth on an accumulated basis and in the full year 2015 overall economic growth was 1.2% (2014: +4.1 year-on-year).
The GDP growth rate in the first half reflected that the agricultural sector grew 2.7% annually, almost the same pace as in H1 2015. In addition, construction showed a healthy 6.6% increase in the first half of the year, beating the 5.1% expansion in H1 2015. Conversely, services lost strength and recorded flat growth, which was a deterioration compared to the 3.2% increase seen in the same period last year. The industrial sector caused concern by contracting a further 1.8% in H1 2016. The Kazakh industry has been contracting since the second half of 2015.
The current slack in economic activity, along with a protracted recession in Russia and low commodities prices—particularly in oil and base metals—prompted the government to reduce its growth forecast for 2016. The government expects the economy to expand 0.5% in 2016, substantially lowering its previous 2.1% projection. Kazakh officials primarily attributed the cut to the oil price. Previously, the government had based its budget on an annual average oil price of USD 40 per barrel. In its adjusted budget for this year, the government now predicts an average oil price of USD 30 per barrel.
Author: Ricardo Aceves, Senior Economist