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COVID-19 called biggest shock to Kazakhstan economy in 20 years

23.07.2020, 11:17 8290
The COVID-19 pandemic is the biggest shock to Kazakhstan’s economy in almost two decades, Kazpravda.kz refers to the economic update of the World Bank on Kazakhstan (summer 2020) "Navigating the crisis", stating.
 
In 2020, Kazakhstan's economy may contract by 3% for the first time since the late 1990s, followed by a moderate recovery of 2.5% in 2021, according to Kazakhstan Economic update of the World Bank (Summer 2020) "Navigating the Crisis".
 
Despite modest GDP growth of 2.3% in the first quarter of this year, economic activity slowed significantly in the following months as a result of falling commodity prices, reduced trade and the impact of measures to prevent the spread of COVID-19.
 
Consumer demand increased by only 1.2%, which is a consequence of growing concern, a decrease in consumer confidence of the population due to the coronavirus pandemic and the imposed quarantine. Investment growth is also slowing and will largely be supported by foreign direct investment in the oil and gas sector and investment in housing. Inflation pressure is expected to remain through the end of 2020, but will slow as the effect of exchange rate depreciation gradually dissipates. Inflation this year will remain above the central bank target of 6 percent, following depreciation of the tenge.
 
The authorities have taken proactive measures to contain the COVID-19 pandemic, and the accumulated budgetary reserves have allowed the government to introduce a package of measures to mitigate the impact of COVID-19 on the economy, the report says. However, weak oil demand and prices, as well as a protracted pandemic, pose serious risks to the economic outlook. It may be wise for the authorities to consider using available resources to provide additional assistance to the poor and vulnerable, protect productive assets and accelerate reforms to support economic recovery, Sjamsu Rahardja, Senior Economist of the World Bank Country Office in Kazakhstan, believes.
 
It is noted that prolonged crisis is likely to increase poverty and can increase inequality in Kazakhstan. Preliminary estimates suggest that the poverty rate may rise in 2020 from a projected 8.3 to 12.7 percent – equating to more than 800,000 additional people living in poverty.
 
The shock to Kazakhstan’s labor market, due to both the pandemic and the mitigation measures, had severe implications for employment, particularly sectors that employ low skilled workers. Unequal access to quality education, especially during lockdown, can negatively impact human capital development for the vulnerable population. School closures could translate into more than a third of the school year lost in learning, and such an impact could mean a downgrade in the Program for Student Assessment International (PISA). The proportion of students with functional literacy below the threshold is estimated to rise by 3 percent (from 64 to 67%).
 
The rate of loss in education and training due to COVID-19 will have an impact on the economy for decades. This impact is estimated at 2.9%, resulting in a total economic loss of up to US $ 1.9 billion per year, noted Jean-Franзois Marteau, Country Manager of the World Bank for Kazakhstan. He believes it is necessary to give priority to education and skills development, increase funding for the education sector, restore learning for students who have lost most during the pandemic. This means that expanding access to quality distance education and mid-term modernization of education will be critical to mitigate the expected decline in the quality of human capital in Kazakhstan caused by the pandemic.
 
The report says that a renewed focus on reforms in logistics, digital communications, and the financial sector could support the private sector in seeking new opportunities.

Source: kazpravda.kz


 
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