KAZAKHSTAN MACROECONOMIC OUTLOOK, October 2020

KAZAKHSTAN MACROECONOMIC OUTLOOK, October 2020

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The headliner of the global agenda remains the issue of the second wave of the COVID-19 pandemic. Will countries cope with the challenge called COVID-19? Which country pursued the most effective economic policies during this difficult period? In addition to the coronavirus infection, geopolitical aggravation has recently been manifested (Belarus and Kyrgyzstan), countries are increasingly entering armed conflicts (Nagorno-Karabakh and civil revolutions are taking place.

Since early summer, the price of Brent crude oil has dropped 20% to 36 USD per barrel in early November. This is happening against the backdrop of the introduction of quarantine measures in European countries, which worsens expectations for an early recovery in energy demand. One of the events to which all attention is riveted is the US presidential election. The power of uncertainty about the outcome of the elections can be seen now in the increased volatility of the stock markets. The outcome of this event can determine many economic and political processes in the world.

In the second half of the third quarter of 2020, the government made a decision to ease quarantine measures. Service providers were allowed to resume work, albeit with some restrictions. This breathed a breath of air into the Kazakh business in terms of the share that the service sector occupies in the country's economy.

In its 2020 macroeconomic review of Kazakhstan, AERC relies on three main prerequisites: a 7.9% decline in the economies of trading partners, stabilization of the average annual oil price of about USD 41.2 per barrel, and oil and gas condensate production at the level of 84.9 million tons. Under these conditions, the AERC estimate shows that the real GDP of Kazakhstan will decrease by 3.6% in annual terms this year - the lowest rate since 1995. At the same time, the level of average annual consumer inflation will accelerate to 7.9%. Also, according to AERC, the current account of the balance of payments will be equal to -9.7 billion USD, or -7.3% of GDP, and the government budget deficit will be 2.9 trillion tenge, or 4.3% of GDP.

In 2021, elections to the Mazhilis of the Parliament of the Republic of Kazakhstan will be held. This event can already be considered memorable, since for the first time in 16 years the elections will be held not ahead of schedule, but within constitutional terms. Thus, a lot of interesting things await the country's economy and society. Additionally, AERC presents in this review its forecast for Kazakhstan's macro indicators for 2021.

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