Kazakhstan is an upper-middle-income country with per capita GDP of nearly US$13 thousand in 2013. Kazakhstan’s real GDP growth slowed from 6 percent in 2013 to 3.9 percent during the first half of 2014, due to internal capacity constraints in the oil industry, less favorable terms of trade, and an economic slowdown in Russia. The contribution of net exports to GDP growth improved materially followed by a sharp devaluation of the Kazakhstan tenge in February 2014, leading to a strong drop in imports of goods that became more costly. As a result of the devaluation, domestic inflation, as measured by the consumer price index (CPI), increased from 4.8 percent year-on-year in December 2013 to 6.9 percent in August 2014, due to higher imported input prices.
Income growth in the country had a positive impact on poverty indicators, with prosperity shared broadly. The share of the Kazakhstan population living in poverty went down from 47 percent in 2001 to about 3 percent in 2013, as measured by the national poverty line. Similarly, at the international poverty line, as measured by the purchasing power parity (PPP)-corrected US$2.50 per capita per day, poverty in Kazakhstan fell from 41 percent in 2001 to 4 percent in 2009. However, against a benchmark of a higher poverty line at the PPP-corrected US$5 per capita per day (which is more appropriate for countries with a higher level of income per capita), some 42 percent of Kazakhstan’s population were still living in poverty in 2009, though down from 79 percent in 2001. 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 2011, 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 4.5 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.
Looking forward, despite the short-term vulnerabilities accentuated by the uncertain regional economic outlook, Kazakhstan's medium-term prospects look promising. In the medium term, the economy will continue to grow on the back of the expanding oil sector, while growth of the non-oil economy will be lower due to lower domestic demand. In the longer run, Kazakhstan’s development objective of joining the rank of the top 30 most developed countries by 2050 will depend on its ability to sustain balanced and inclusive growth. 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 : Commitments by Fiscal Year (in millions of dollars)*
*Amounts include IBRD and IDA commitments
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.
Kazakhstan : Commitments by Fiscal Year (in millions of dollars)*
*Amounts include IBRD and IDA commitments
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.