Economy

Kazakhstan is the largest nation and economy in Central Asia, and the ninth largest nation by area in the world. It possesses enormous fossil fuel reserves as well as minerals and metals. It also has considerable agricultural potential with its vast steppe lands accommodating both livestock and grain production, as well as developed space infrastructure, which took over all launches to the International Space Station from the Space Shuttle.

Background

Kazakhstan's industrial sector rests on the extraction and processing of natural resources and also on a relatively large machine building sector specialising in construction equipment, tractors, agricultural machinery and some military items. The break-up of the USSR and the collapse of demand for Kazakhstan's traditional heavy industry products have resulted in a sharp contraction of the economy since 1991, with the steepest annual decline occurring in 1994. In 1995-97 the pace of the government program of economic reform and privatisation quickened, resulting in a substantial shifting of assets into the private sector. The December 1996 signing of the Caspian Pipeline Consortium agreement to build a new pipeline from western Kazakhstan's Tengiz Field to the Black Sea increases prospects for substantially larger oil exports in several years. Kazakhstan's economy turned downward in 1998 with a 2.5% decline in GDP growth due to slumping oil prices and the August financial crisis in Russia. A bright spot in 1999 was the recovery of international petroleum prices, which, combined with a well-timed tenge devaluation and a bumper grain harvest, pulled the economy out of recession.

Current GDP per capita shrank by 26% in the Nineties. However since 2000, Kazakhstan's economy grew sharply, aided by increased prices on world markets for Kazakhstan's leading exports: oil, metals and grain. GDP grew 9.6% in 2000, up from 1.7% in 1999. Since 2001, GDP has been among the highest in the world. In 2006, extremely high GDP growth had been sustained, and grew by 10.6%. Business with Russia and China, as well as neighbouring CIS nations have helped to propel this growth. The increased economic growth also led to a turn-around in government finances, with the budget moving from a cash deficit of 3.7% of GDP in 1999 to 0.1% surplus in 2000. International reserves swelled to $37.63 billion by April 17, 2007.

Agriculture

Agriculture accounted for 6.3% of Kazakhstan's GDP in 2006. Grain (Kazakhstan is the sixth-largest producer in the world) and livestock are the most important agricultural commodities. Agricultural land occupies more than 846,000 square kilometres (327,000 sq mi), consisting of 205,000 square kilometres (79,000 sq mi) of arable land and 611,000 square kilometres (236,000 sq mi) of pasture and hay land. Chief livestock products are dairy products, leather, meat and wool. The country's major crops include wheat, barley, cotton and rice. Wheat exports, a major source of hard currency, rank among the leading commodities in Kazakhstan's export trade. In 2003 Kazakhstan harvested 17.6 million tons of grain in gross, 2.8% higher compared to 2002. Kazakh agriculture still has many environmental problems from mismanagement during its years in the Soviet Union.

Natural Resources

Kazakhstan has an abundant supply of accessible mineral and fossil fuel resources. Development of petroleum, natural gas and mineral extraction has attracted most of the over $40 billion in foreign investment in Kazakhstan since 1993 and accounts for some 57% of the nation's industrial output. According to some estimates, Kazakhstan has the second largest uranium, chromium, lead and zinc reserves, the third largest manganese reserves, the fifth largest copper reserves, and ranks in the top ten for coal, iron and gold. It is also an exporter of diamonds.

In total, there are 160 deposits with over 2.7 billion tons of petroleum. Oil explorations have shown that the deposits on the Caspian shore are only a small part of a much larger deposit. It is said that 3.5 billion tons of oil and 2.5 trillion cubic metres of gas could be found in that area. Overall the estimate of Kazakhstan's oil deposits is 6.1 billion tons.

Kazakhstan holds about 26 billion bbl of proven recoverable oil reserves and 1.841 trillion cu m of gas. Industry analysts believe that planned expansion of oil production, coupled with the development of new fields, will enable the country to produce as much as 3 million barrels (477,000 cu m) per day by 2015, lifting Kazakhstan into the ranks of the world's top 10 oil-producing nations. Kazakhstan's 2003 oil exports were valued at more than $7 billion, representing 65% of overall exports and 24% of the GDP. Major oil and gas fields and their recoverable oil reserves are Tengiz with 7 billion barrels (1.1 cu km); Karachaganak with 8 billion barrels (1.3 cu km) and 1,350 cu km of natural gas; and Kashagan with 7 to 9 billion barrels (1.1 to 1.4 cu km).

Current Situation

The government of Kazakhstan plans to double its Gross domestic product (GDP) by 2008 and triple by 2015 compared to 2000. The GDP growth was stable in the last five years, and was higher than 9%. GDP growth in 2005 was 9.2%, and 9.4% in 2004. Kazakhstan's economy grew by 9.2% in 2003, buoyed by high world crude oil prices. GDP grew 9.5% in 2002; it grew 13.2% in 2001, up from 9.8% in 2000.

External opinion generally considers Kazakhstan's monetary policy to be well-managed. Its principal challenges in 2002 were to manage strong foreign currency inflows without sparking inflation. In 2003 inflation did not remain under control, registering at 6.8% instead of the forecast level of 5.3%-6.0%. In 2002 inflation was 6.6%, compared to 6.4% in 2001. Because of its strong macroeconomic performance and financial health, in 2000 Kazakhstan became the first former Soviet republic to repay all of its debt to the International Monetary Fund (IMF), 7 years ahead of schedule. In March 2002, the US Department of Commerce graduated Kazakhstan to market economy status under US trade law. The change in status recognised substantive market economy reforms in the areas of currency convertibility, wage rate determination, openness to foreign investment, and government control over the means of production and allocation of resources.

In September 2002, Kazakhstan became the first country in the CIS to receive an investment-grade credit rating from a major international credit rating agency. As of late December 2003, Kazakhstan's gross foreign debt was about $22.9 billion. Total governmental debt was $4.2 billion. This amounts to 14% of the GDP. There has been a noticeable reduction in the ratio of debt to GDP observed in past years; the ratio of total governmental debt to GDP in 2000 was 21.7%, in 2001 it was 17.5%, and in 2002 it was 15.4%.

The upturn in economic growth, combined with the results of earlier tax and financial sector reforms, dramatically improved government finances from the 1999 budget deficit level of 3.5% of GDP to a deficit of 1.2% of GDP in 2003. Government revenues grew from 19.8% of GDP in 1999 to 22.6% of GDP in 2001, but decreased to 16.2% of GDP in 2003. In 2000, Kazakhstan adopted a new tax code in an effort to consolidate these gains. On November 29, 2003 the Law on Changes to Tax Code was adopted, which reduced tax rates. The value added tax fell from 16% to 15%, the social tax from 21% to 20%, and the personal income tax from 30% to 20%. Kazakhstan furthered its reforms by adopting a new land code on June 20, 2003, and a customs code on April 5, 2003.