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.