Kazakhstan overview

Cityscape in Kazakhstan

Kazakhstan is one of the largest countries of operations of the EBRD, with about US$ 6.5 billion invested over the last 20 years, and is demonstrating strong economic growth supported by high oil prices. However, many challenges remain, especially in the banking sector in the aftermath of the crisis, and corporate governance and the business climate need to be further improved.

In Kazakhstan we have the following priorities:

Balancing the roles of the public and private sectors. The Bank will continue to support the growth of private enterprises, which are still outweighed by the public sector. By investing in the private sector, including small and medium-sized enterprises (SMEs), in agribusiness and the non-extractive sectors, the EBRD hopes to improve the economy’s competitiveness. The Bank remains interested in the privatisation programme announced by the government. At the same time, the Bank will continue to support the reform of Kazakhstan’s public sector and the commercialisation of state-owned enterprises.

Broadening access to finance, strengthening the banking sector and developing local capital markets. Many firms continue to suffer from insufficient access to finance. The EBRD will work on improving the resilience of Kazakhstan’s financial sector, which will in turn help relieve pressures on businesses, especially SMEs and the non-extractive sector. 

Inter-regional connectivity and international integration. Investing in Kazakhstan’s infrastructure remains an important focus of the EBRD. By supporting inter-regional and cross-border rail and road projects, the Bank seeks to enhance connectivity and boost the economic inclusion of remote regions of the country. 

Green economy transition. The EBRD is the largest investor in sustainable energy in Kazakhstan, covering both renewable energy and energy-efficient technologies. It will continue to combine investment with policy engagement, in order to further help the country develop a supportive regulatory framework for sustainable energy, water and resource use. Decreasing Kazakhstan’s carbon footprint is crucial for the country’s sustainable development across all sectors, notably in agriculture, energy and industry.

As well as being a country where the EBRD works, Kazakhstan is also an EBRD donor. In 2013 the Kazakh government signed a €6 million agreement for Technical Cooperation funding, principally supporting policy dialogue objectives in Kazakhstan with a primary focus on transport, telecommunications and energy efficiency. The fund has a co-financing arrangement with the EBRD Shareholder Special Fund untilthe end of 2015. Also in 2015, the government replenished its TC account providing further €11.5 million funding under the Enhanced Partnership Framework Arrangement. In addition, it provided funding to the Women in Business Programme (€7.5 million equivalent of $8.2 million) and Business Advisory Services (€22.2 million) in Kazakhstan.

The EBRD’s latest Kazakhstan strategy was adopted on 5 July 2017

EBRD forecast for Kazakhstan’s Real GDP Growth in 2018 4.0%

EBRD forecast for Kazakhstan’s Real GDP Growth in 2019 3.5%

 In Kazakhstan real GDP growth accelerated to 4.1 per cent both in 2017 and in the first three quarters of 2018 from 1 per cent in 2018. The economy grew strongly due to increased oil production and favourable oil prices. Oil output expanded by 10.5 per cent in 2017 and by 6.6 per cent year-on-year in January-September 2018. A recovery in real wages and higher lending to households led to a 4.5 per cent growth year-on-year in private consumption in the first half of 2018, after a meagre 1.5 per cent in 2017. Fixed investment growth was 5.3 per cent year-on-year in the first half of 2018, up from 4.0 per cent in 2017. The exchange rate appreciated in 2017, supported by the rebound in oil prices. However, the tenge came under some pressure in 2018 despite further rising oil prices, resulting in a weakening against the US$ by 8.5 per cent during the first nine months of 2018.

This contributed to some acceleration of inflation in the third quarter of 2018. At 6.1 per cent in September 2018, inflation is still within the central bank’s target of 5.0-7.0 per cent. In response, the central bank intervened in the foreign exchange market in September 2018 and also raised the base rate from 9.0 per cent to 9.25 per cent in October 2018, reversing a series of rate cuts since May 2016. Banking sector imbalances surfaced as the central bank deprived three smaller banks of their licenses and provided liquidity support to the second largest bank in September 2018. The economy’s growth rate is projected to decelerate somewhat to 4.0 per cent in 2018 and 3.5 per cent in 2019 due to slower additional gains from oil output and a weak average real income growth due to inflation. However, the foreseen substantial increase in the minimum wage will underpin private consumption to some degree. Ongoing fixed investment in the oil and gas sector will also likely support economic growth. 

Kazakhstan in the EBRD’s 2018-19 Transition Report