Kazakhstan's industrial sector is primarily focused on the extraction and processing of these natural resources. - File photo

A World Bank recent report reveals that after sustaining a sharp decline in output during the global financial crisis and recession, economic growth is returning across the Europe and Central Asia (ECA) region. Every country in the region is expected to record positive growth during 2011. But growth is more tepid in Central and Southeastern Europe relative to the Commonwealth of Independent States (CIS) where elevated commodities prices have lifted net exports, and increased migrants’ remittances and private consumption. Higher food and energy prices threaten to increase poverty, particularly in lower income economies in the CIS such as Armenia, Krygyz Republic, and Tajikistan, and add more macroeconomic pressures across the region. Taking advantage of improved global growth prospects will require new, deeper structural reforms to improve international competitiveness while ensuring that financial sector vulnerabilities are resolved transparently. The region faces long-standing economic and social challenges. Countries in the ECA region are projected to recover from the crisis more slowly than in other regions. GDP grew at a robust rate of about seven per cent in 2007 before contracting to about –6.5 in 2009. Growth in 2010 reached around 4.5 and prospects for 2011 and 2012 are only slightly better, as compared to over 5.5 in Latin America and about nine per cent in developing Asia in 2010.

The region has faced the greatest fiscal pressures among all the world’s regions during the global economic crisis. Average fiscal deficits were -5.5 of GDP in 2009 and are expected to be -4 per cent in 2010. By comparison, the 2010 figures are -2.6 in Latin America and about -2.9 per cent in East Asia. General government spending in the region’s middle-income countries such as Poland, Russia, Ukraine, and Turkey is now higher than 40 percent of GDP in contrast with the 30 per cent for middle-income countries in other regions. Ensuring that governments can strengthen inclusion and address food and fuel price increases will become more difficult with tighter budgets, unless government spending is made more efficient.

The International Monetary Fund is predicting five per cent GDP growth in 2011 on average for Commonwealth of Independent States. However, nations specializing in exporting valuable commodities will have a significantly higher growth rate and predicts growth for Central Asia’s will be above the CIS average. Turkmenistan is expected to post a higher than average 9 percent growth in 2011 on the strength of its gas exports. The IMF predicts 6.4 percent Turkmen GDP growth in 2012. Uzbekistan, based on the strength of projected cotton and gold exports, will record GDP growth of seven per cent for both 2011 and 2012.

Kazakhstan, the Central Asian region’s economic powerhouse, is estimated to achieve a 5.9 rise in GDP for 2011 and a 5.6 rise in 2012.The region’s two poorest nations, Kyrgyzstan and Tajikistan, are predicted to record GDP growth rates above five per cent for both 2011 and 2012. Tajikistan’s economy is estimated to rise by 5.8 this year and five per cent next year, while Kyrgyzstan’s economy is expected to record a five per cent increase this year and a six per cent rise in 2010. Kyrgyzstan will have difficulty navigating increasing global food prices. The IMF in its latest report has highlighted the need for Kazakhstan, Tajikistan and Kyrgyzstan to improve their banking sectors by addressing non-performing loans.

Uzbekistan

Uzbekistan is among the region’s most rapidly expanding economies as a result of broad industrial expansion. The Uzbek GDP is expected to grow by 8.5 per cent in 2011 with similar expansion in 2012. This comes on the heels of a strong economic performance in 2010. Uzbek construction grew 8.1 in 2010, due primarily to increased government development of rural infrastructure and housing. Foreign investment in hydrocarbons also increased significantly with overall foreign investment accounting for 25.1 per cent of the GDP.

High global cotton, gold and gas prices also buoyed the Uzbek economy in 2010, resulting in a 10.8 per cent growth in goods and services exports. Uzbekistan is also growing less dependent on imports of goods, services and machinery. Imports of machinery dropped 27.3, while imported goods and services fell by 6.8 per cent in 2010. The ADB predicts that global cotton and gold will peak in 2011. While their prices are expected to remain high, negative effects on the Uzbek economy are not expected. The main economic challenge facing Uzbekistan in the next year is mitigating the effects of globally rising food prices.

Uzbekistan’s economy appears to have been unaffected by the crisis, with an official growth rate above eight per cent in 2009 and 2010, driven mostly by favourable external conditions and expansionary fiscal policies. However, GDP growth slowed down somewhat to 7.6 during 2011 Q1. The European Bank for Reconstruction and Development (EBRD) decreased its forecast on the economic growth of Uzbekistan in 2011 and 2012. According to the EBRD, the GDP of Uzbekistan will grow by seven per cent in 2011 and 7.5 in 2012. Inflation rate in Uzbekistan will make up 11 per cent in 2011 against 9.4 in 2010.

Current account balance surplus grew from 6.7 to GDP in 2010 to 10 per cent to GDP in 2011. Net foreign direct investments will make up 3.2 to GDP in 2011 against 4.2 per cent to GDP in 2010.

According to the UN latest report, Uzbekistan will, however, record one of the highest economic growth rates in the Commonwealth of Impendent States (CIS) in 2011 and 2012. In line with the forecast of the UN experts, Uzbekistan’s economy will rise by eight per cent in 2012, the second highest GDP growth among the CIS states. Turkmenistan will claim the first place with 10% GDP growth in 2011 and 2012. According to estimates of the UN, the real GDP growth of Uzbekistan in 2010 reached 8%. The Government of Uzbekistan forecasts that the economy of the country will grow by 8.3 in 2011. The GDP of Uzbekistan increased by 8.5 per cent in 2010.

According to the IMF forecast, inflation in Uzbekistan will comprise 11.6 in 2011 and it will grow to 12.3 per cent in 2012.

Current account balance surplus will make up 10 per cent to GDP of Uzbekistan in 2011 and then expected to decrease to 6.7 in 2012. The IMF expects that unemployment level in Uzbekistan will be at the 0.2 per cent level in 2011 and 2012, which is the lowest figure among the CIS states. ADB said that current trade balance surplus will be at the level of 16.3 to GDP in 2011 and 12.6 per cent in 2012.

Kazakhstan

The economy of Kazakhstan is the largest economy in Central Asia. The country has an abundance of natural resources with oil and natural gas, uranium, chromium, lead, zinc, manganese, copper, coal, iron, and gold being the most important.

Kazakhstan's industrial sector is primarily focused on the extraction and processing of these natural resources. In addition, Kazakhstan has a large agricultural sector with very active markets on livestock and grains. However, the agricultural sector’s contribution to GDP is relatively small (five per cent of GDP), but in terms of employment the sector is important, as nearly 30 per cent of the labour force works in the agricultural sector. Industry contributes a relatively large 43% to GDP while the services sector accounts for the remaining 52 per cent.

With a nominal GDP of $138bn and 16 million inhabitants, GDP per capita amounts to $8,406. As such, Kazakhstan is classified as an upper middle income country by the World Bank. Kazakhstan’s economic welfare is mainly derived from the country’s vast endowment of natural resources, such as hydrocarbons and numerous types of minerals. Kazakhstan’s economy is therefore highly dependent on extractive industries and on the oil sector in particular, which accounts for 60 per cent of total exports and more than 25 per cent of GDP. On the one hand, Kazakhstan’s oil reserves will provide the country with income for years to come. Oil production is expected to double from today’s level when the Kashagan Caspain Sea oil field comes online between 2015 and 2020. By 2020 Kazakhstan’s economy is set to grow 2.5-3 times.

Kazakhstan recovered strongly from the global financial crisis in 2010. Preliminary data point to 7 percent GDP growth last year, with particularly strong increases in industrial output (10 per cent) and foreign trade—exports in dollar terms increased 36 per cent last year. Household incomes increased by some 10 per cent in real terms, thanks in part to seven per cent growth in real wages and an 11 per cent increase in the real value of social protection expenditures paid out. This helped power an 11 per cent increase in the volume of retail sales in 2010, providing further indications of a strong recovery in household incomes and spending. By contrast, construction and agriculture lagged the rest of the recovery. Agricultural output dropped 12 per cent because of drought conditions in Kazakhstan’s northern and western regions.

According to various estimations Kazakhstan’s economy is entering into a period of post crisis growth. In 2011 - 2015 the increase in oil and gas production and gradual development of the metallurgical and accompanying sectors is expected.

Additionally sectors not related to natural resources are being developed, such as retail, pharmaceutical and transport. These have previously been considerably under-represented in Kazakhstan and therefore offer prospects for growth. Measures are also being taken for the banking sector revival and all these processes contribute to the country’s economic.

Kazakhstan's foreign trade turnover in the first half of the year grew by 44.7 percent against the same period of the last year.

The country's foreign trade turnover totaled $61.5 billion (export - $44.9 billion import - $16.6 billion). Consumer price inflation remained relatively restrained over the course of 2010, averaging 7.4 for the year. However, under the influence of drought and rising year-end food prices, as well as higher electricity and water tariffs, year-on-year consumer price inflation rates seem poised to go much higher in the first six months of 2011. Food prices would seem major concern going into the new- year.

Kazakhstan is steadily recovering from the global financial crisis which hit it hardest in the region. However, still-weak banks and rising inflation will be economic challenges to the country’s economic bounce-back. Still, Kazakhstan is expected to post a 6.5 growth in GDP, and 6.8 per cent in 2012, on the basis of a stronger agricultural output in 2011 coupled with an increase in oil and demand prices. However, BMI forecasts economic expansion of 7.2% and 6.9% in 2011 and 2012 respectively. The Kazakh economy expanded at a healthy 6.9 per cent in the first quarter of 2011. The Kazakh economy will enjoy robust growth through coming quarters.

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