Kazakhstan: 3-D Printing a New Economy
Radical changes. After spending several years of trying to mitigate the impact of the currency collapse and economic slowdown, the government has adopted a radical program to try and revive the economy and attract a bigger volume of inward investment. This includes: Higher budget spending and a 3% deficit; Build up debt and take more money from the National Fund; Take the bad assets from banks into a Bad Bank; Tackling high-level corruption; Changes in government; Constitutional changes aimed at calming concerns over succession.
3rd phase of modernization. The Nurly Zhol modernization program has been re-invigorated with the aim of creating much greater diversification in the economy and boosting the role of SMEs.
3-D printing and food processing. Key target industries include agriculture, food processing, transport & logistics, financial services and technology. The government has particularly highlighted 3-D printing as an industry in which it wants to see Kazakhstan take a lead.
Oil will remain dominant. Despite plans for diversification, Kazakhstan is planning to be a major player in the global oil sector. The country’s major oil projects are set for growth. Kashagan finally started to produce oil while the giant Tengiz field is set for a US$36.5 bln expansion program.
One Belt, One Road. Kazakhstan has a huge competitive advantage in that it is a key transit corridor for China’s One Belt, One Road program. This means that Kazakhstan will be better able to export a wide range of goods both to China and to Europe using the railway system.
Economy growth strengthening. The economy is expected to grow between 2.5% and 3.0% this year, after only 1% last year, on the back of the better oil price and, in particular, the boost to budget spending from the revised fiscal policy.
Tenge tied to ruble. The tenge has been much more stable since mid-2016. In reality, it is now tied to the Russian ruble and the NBK will try to keep the exchange rate at just above KZT5/RUB for competitiveness reasons.
Rates falling. The NBK steeply cut its benchmark rate in 2016 and by another 100 bps in February. It will cut again this quarter and should end the year with a key rate of 9.5%. The main reason for the cuts is because inflation has fallen equally steeply and should end this year just within the NBK target range.
Privatization slightly delayed. The government remains committed to the privatization plan (to sell over 1,000 state enterprises) but the start of the major part of the plan, to privatize 8-10 major state corporations via IPOs, has been delayed until 2019.