As a highly globally integrated, resource-rich, upper-middle income country, Kazakhstan has been facing significant challenges in the current global environment. Kazakhstan’s major challenges include managing its public finances to preserve fiscal stability and generating broad-based economic growth.
According to the World Trade Organization, Kazakhstan’s total trade to gross domestic product (GDP) ratio was 69% in 2014, with per capita trade of $8,720. It exhibited a relatively large surplus of $37 billion on merchandise trade, with nearly nine-tenths of the exports under the “fuels and mining” category, of which about three-fourths were destined for the European Union. In contrast, little over four-fifths of its imports were in the “manufacturers” category, with the Russian Federation accounting for one-third, and the European Union accounting for around one-fifth of the total imports. In 2014, Kazakhstan had a service trade deficit of $6.3 billion. This suggests that while Kazakhstan is highly integrated globally, its trade profile lacks diversification, and it is vulnerable to slowdowns in oil and metal cycles, as is currently being experienced globally.
The global economic growth remains subdued, with a further downside risk. Thus, in its April 2016 World Economic Outlook report, the International Monetary Fund projects baseline global real GDP growth of 3.2%, 0.2 percentage points below its January 2016 projections (Table 1.1, page 2). The report has downgraded growth for the Central Asia and Caucasus region, which includes Kazakhstan, due in part to slower growth in the People’s Republic of China and negative growth of 1.8% in the Russian Federation, two of Kazakhstan’s important economic partners. The same report (Table 1.1, page 2) projects oil prices in US dollars to decline by 31.6% in 2016 (on top of a 47.2% decline in 2015), but projects an increase by 17% in 2017. For nonfuel commodities, the projection is for a decline of 9.4% in 2016 (on top of a 17.5% decline in 2015), and a further decline of 0.7% in 2017. Saudi Arabia’s ambitious $2 trillion program to prepare for the post-oil economy is illustrative of the far-reaching changes being contemplated.