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President Addresses Recession Concerns, Devaluation Rumours

 

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President of Kazakhstan Nursultan Nazarbayev chaired an expanded government meeting on the domestic economy and steps for its further development on Feb. 11, during which concerns regarding a possible devaluation of the national currency were discussed.

There is no recession, Nazarbayev said; however, there are number of trends forcing the government to take measures to protect the country’s economy and prevent a recession.

“I want to emphasise that there is no [internal] crisis. The global crisis is an external factor… [The country’s economy is facing] a drop of oil prices [from $100 per barrel back in June 2014 to $50 per barrel]. Global prices on our major export commodities, [such as] metals, fertilisers and others, have been on the decline. [Another factor is] an economic crisis [in Russia], tumbling of ruble, recession in Russia,” he emphasised.

The President illustrated the world’s economic difficulties with the growing number of unemployed around the world, including 43 million in the member states of the Organisation for Economic Cooperation and Development, and a 11.5 per cent of unemployment in euro-zone.

We are part of the globalised economy and we cannot avoid the negative impact of external factors,”the President said.

The Nurly Zhol economic policy is designed to respond to these economic pressures, he said, while warning that this year “is going to be tough” and asking for other suggestions.

This programme, announced by Nazarbayev in his state-of-the-nation address in November 2014, focuses on transport and logistics infrastructure in Kazakhstan.

At the government meeting, Nazarbayev proposed adding new anti-crisis measures to the Nurly Zhol programme, including support for local machinery enterprises, small and medium-sized businesses, agricultural enterprises and exporters.

First Deputy Prime Minister Bakhytzhan Sagintayev also suggested measures to support the national economy: supporting domestic entrepreneurs through a system of benefits, from electricity tariffs and railway carriages to trade preferences, and enhancing local content requirements and long-term contracts with national companies and backbone enterprises.

The government and National Bank of Kazakhstan are taking measures to ensure tenge liquidity, he noted, and have begun negotiating with the Russian government on trade issues.

Nazarbayev also emphasised that the current trade issues with Russia are temporary and will not affect overall economic integration. He proposed to alleviate trade pressure by introducing a system of quotas in trade with Russia.

The government intends to support the tenge by measures aiming “de-dollarisation” of Kazakhstan's economy. Legislative changes to payments and currency regulation are expected, and it is likely that non-bank foreign exchange offices will be regulated more strictly.

The National Bank plans to prevent the national currency exchange rate from fluctuating sharply in 2015, Chairman of the National Bank Kairat Kelimbetov said at the meeting.

“We … will not allow a single-step shock devaluation, but will work within a smooth and flexible change in the exchange rate,” Kelimbetov said.

Nazarbayev said he had no reason not to trust the National Bank and assured the people of Kazakhstan that nothing would be hidden from them. Previous devaluations in 2009 and 2014 have led to the stockpiling of foreign currency by citizens.

Despite assurances that Kazakhstan is not facing a recession, a package of measures to maintain stability in the economy and prevent downturns was proposed at the meeting. Nazarbayev suggested looking for savings in the preparations for the Universiade in Almaty in 2017, as well as reducing some other budget programmes, though he stressed that all social obligations must be met in full.