While the world economy continues to be unsettled, economic growth in Kazakhstan has been solid. Strong domestic demand, coupled with increased oil output and recovered crop production, boosted economic growth from 5% in 2012 to 6% in 2013. Read More »
Kazakhstan is an upper-middle-income country with per capita GDP of nearly US$13 thousand in 2013. Strong domestic demand, coupled with increased oil output and recovered crop production, boosted economic growth from 5 percent in 2012 to 6 percent in 2013. An expansion of credit was the key driver of growth in private consumption and investment activity in 2013. Prospects of additional oil output with Kashagan coming on stream should help boost economic activity in the coming years and increase Kazakhstan’s vulnerability to external shocks unless the country succeeds in diversifying its endowments from natural resources to stronger institutions and higher quality human capital.
Income growth in the country had a positive impact on poverty indicators, with prosperity shared broadly. Over the last year, the share of the population living in poverty went down from 5.5 percent in 2011 to 3.8 percent in 2012, as measured by the national poverty line. This is a significant improvement from 47 percent officially registered in 2001. Similarly, at the international poverty line, as measured by the PPP-corrected US$2.5 a day per capita, poverty in Kazakhstan fell from 41 percent in 2001 to 4 percent in 2009. Kazakhstan’s performance in the World Bank’s indicator of shared prosperity also shows progress, with growth rate of consumption per capita of the bottom 40 percent of households of about 6 percent, while the average consumption growth for all households was about 5 percent during 2006-2010.
Trade policy will remain a central instrument to help the country integrate into the global economy, but Kazakhstan will face a complex trade policy environment in the medium-term. The economy is adjusting to the Eurasia Customs Union which it joined in 2010 and is pursuing an accelerated schedule of further integration into the Common Economic Space by 2015. Kazakhstan is also expected to join the World Trade Organization in the near future while its trade strategy lists several free trade agreements to be negotiated.
Education is a high priority for Kazakhstan, and in 2009, Kazakhstan ranked first on UNESCO’s “Education for All Development Index” by achieving near-universal levels of primary education, adult literacy, and gender parity. These results have reflected Kazakhstan’s efforts of expanding pre-school access and free, compulsory secondary education. For the next 10 years, Kazakhstan is embarking on further major reforms across all education levels.
Kazakhstan faces challenges in restructuring its healthcare system. The country’s health outcomes lag behind its rapidly increasing income. The major causes of adult mortality are non-communicable diseases such as cancer, cardiovascular disease, other tobacco and alcohol-related diseases and injuries. The new State Health Care Development Program recognizes health as one of the country’s major priorities and a pre-requisite for sustainable socioeconomic development.
Agriculture accounts for only 5 percent of GDP, but the sector continues to employ almost one-fourth of the working population and is critical to addressing poverty and food security, as well as providing an important avenue for diversification of the economy.
Kazakhstan inherited significant environmental concerns related to past military nuclear testing programs, industrial and mining activities, as well as land degradation, desertification, and water scarcity problems. Air and water pollution are a significant environmental concern in Kazakhstan. Environmental monitoring systems are not adequately funded to reflect the current pollution load on the environment. The Government has made progress in environmental management, but significant challenges remain.
Looking forward, Kazakhstan’s development objective of joining the rank of the top 30 most developed countries by 2050 will depend on its ability to move away from natural resource dependence toward more balanced growth, and to conduct social modernization to achieve more inclusive growth and faster improvement in social development outcomes. In the near to medium term, economic prospects depend on a continuation of stability-oriented macroeconomic policies that hinge on continued adherence to the rules-driven framework for resource earnings and sustainable financial sector development. Enhancing medium- to long-term development prospects depends on Kazakhstan’s success in diversifying its endowments, namely, creating highly skilled human capital, improving the quality of physical capital, and, more importantly, strengthening institutional capital—all of the necessary ingredients for the development and expansion of the private sector in the country.
Kazakhstan joined the World Bank in 1992. Since then the Bank has provided 40 loans to the country for a total amount of more than US$6.8 billion, of which about 65 percent, or over US$4.4 billion, has already been disbursed.
The World Bank’s current portfolio is composed of 12 projects with a total net commitment of US$3,671 million, of which US$1,453 million has been disbursed. While over 80 percent of the commitments are concentrated in the two big South-West Road and East-West Road projects, the portfolio remains diverse, with two-thirds of the projects focused on institutional building in the areas of education, health, innovations, and the revenue administration agenda. The lending pipeline includes several projects at various stages of preparation.
The new Country Partnership Strategy (CPS)from May 1, 2012 is designed to help the Government of Kazakhstan advance implementation of country development agenda through a high impact program, concentrating on key priorities of competitiveness and jobs, improved governance through higher standards and accountability in public administration and service delivery, and safeguarding the environment. The CPS is programmatic by inter-linking knowledge interventions through sequenced products in a multi-year framework to maximize impact. The CPS targets key areas of lagging performance as revealed by country development strategies or the Bank’s assessment tools, including international comparative analysis.
The strategy is organized around three broad areas of engagement:
Improving competiveness and fostering job creation with a focus on (i) strengthening fiscal discipline and trade openness; (ii) expanding non-oil sector exports and employment, (iii) re-invigorating financial sector, (iv) strengthening knowledge for sustained growth, (v) improving energy transmission to poor areas, (vi) building transport connectivity, lowering costs;
Strengthening governance and public services with a focus on (i) improving governance, (ii) strengthened budget and accounting institutions, (iii) reforming social protection system, (iv) sharpening strategic approach to health reforms;
Ensuring development is environmentally sustainable with a focus on (i) safeguarding the environment, (ii) raising energy efficiency.
The strategy also acknowledges the role Kazakhstan can play as a provider of experience, and assistance in the Central Asia region and in a broader regional context. The Bank will continue to promote regional cooperation in energy, water, transport, trade, and communicable diseases.
The CPS Completion Report for 2005-2011, submitted to the Board in May 2012, reflects significant progress on several major development issues, based on continued generation of dialogue and debate around high quality advisory and analytical services, responsiveness, CPS outcomes, innovation, and strong, strategic partnership formed under the CPS.
Joint Economic Research Program (JERP) – the cornerstone of the CPS – is a demand-driven technical support and advisory services program co-financed by the Government of Kazakhstan. It has been providing extensive expert support to the Government’s development needs since 2002. The JERP provided extensive advisory and analytical services (AAA) to the Government on the institutional design and implementation of the National Fund (NF). More recently, JERP advisory services helped the Government to avoid fiscally risky banks’ bailout strategies in the wake of a financial sector crisis and to balance macroeconomic and monetary stability with sustainable growth objectives. Also, JERP supported the formulation of medium-term macroeconomic forecasts and government staff training in this area. JERP AAAs on financial sector risks has spurred important amendments to the regulatory and supervision framework for commercial banks and capital markets. Bank AAA under the JERP on all these elements were made highly effective by the Government’s approach of sponsoring a series of high-level brainstorming engagements with the Bank (co-chaired by the Prime Minister), which helped clarify and internalize the policy advice and recommendations.
Given the country's low need for external financing, the World Bank program is built on the premise of cutting-edge knowledge transfer, capacity enhancement and implementation support, bringing benefits that go well beyond funding.
In the first few years after Kazakhstan’s independence, the World Bank focused on helping the country to implement financial and private sector reforms. After 1997, the focus shifted to public administration reform, with specific attention to improving the country's welfare and social protection policies. Currently, the World Bank is assisting the country with managing public sector and finances, promoting competitiveness and fostering job creation, strengthening governance and public services, and ensuring environmentally sustainable growth.
The Bank assisted in upgrading and modernizing the country's power transmission systems, helped increase agricultural productivity by rehabilitating deteriorating irrigation systems, and encouraged the rural community to diversify into non-traditional areas by nurturing their business skills. In addition, people in the country's western region, who have suffered from a shortage of quality water, now enjoy better health as a result of improved water supply and sanitation. The Bank continues help improving the timely availability of water for productive purposes, including irrigated agriculture, fisheries and industry, while at the same time reviving the Northern Aral Sea. Elimination of the legacy of significant environmental problems related to pollution and natural resource use by heavy industries is another big step towards safeguarding the fragile environment.
World Bank projects making a difference:
Eliminating Mercury's Invisible Threat in Kazakhstan Mercury pollution is invisible but dangerous. For decades, a factory just 2 km from Temirtau threatened the health of the 170,000 people living there, and their fragile environment. As a result, more than 1,500 tons of this heavy metal were discharged into the Nura River. A project supported by the World Bank and the Government of Kazakhstan invested into the cleanup of the contaminated area to reduce health risks from this toxic substance.
Connecting the North and South Strong economic growth has led to a sharp increase in the demand for electricity in Kazakhstan. Much of the country's power generation comes from the north, from power plants located in the coal-producing regions and hydroelectric facilities. Power sources in the south are generally small-scale; limited to small hydro, combined heat and power plants, and a high cost oil-fired power plant in Taraz. The combination of unusually severe cold in last several years and antiquated infrastructure used to leave thousands of people in the south in the dark. Cold snaps are still a problem in the region, but power outages have become rare. Since 2009, with support from the World Bank, Kazakhstan has built a new electricity transmission line. This new line provides ample reliable energy to about 3 million people in South Kazakhstan and doubles the energy flow from the north to the south of the country.
Benefiting Before a Road is Built A new road brings many things; access to new places and services, fresh faces, mobility…and jobs. A new road in Akzharma, a remote village in Kazakhstan, isn’t finished yet, but it has already brought enormous changes. Here, the building of the road is nearly as important to locals as the road itself.