OREANDA-NEWS. December 29, 2014. The deterioration of the external factors for the development of Kazakhstan's economy has been observed in 2014.

General economic slowdown in the world and growth of geopolitical instability have occurred in connection with the events around Ukraine. Introduction of mutual sanctions between Russia and the European Union (hereinafter - EU) with the United States has led to decline of growth rates in Russia and destabilization of the macroeconomic situation.

There is the US dollar appreciation and interest rate increase against the background of strengthening the growth rate of gross domestic product (hereinafter - GDP) of the United States, folding of the third program of the Federal Reserve System.

Reduction in the global price of Brent crude from 115 dollars per a barrel at the end of June 2014 to 63 dollars per a barrel on December 22, 2014 (45.2%) occurred as a result of these factors, as well as against the growth of shale oil in the USA.

Kazakhstan's economy grew by 4.2% for 11 months in 2014 against this background.

External trade turnover of the Republic of Kazakhstan has decreased by 8.3% in January-October 2014 in comparison with the same period in 2013. Export of goods has decreased by 4.9% due to the fall in global prices for oil and base metals, reduction of the volume of export of oil, coal, ferro-alloys, copper and aluminum. Import of goods has decreased by 14.5% due to the reduction in imports of machinery and equipment, chemical products and food products.

These external economic trends are risks to the economy of Kazakhstan in 2015.

Under these conditions the economic policy for 2015 will focus on leveling effects of external factors to ensure social and economic stability in the country.

The main objectives of the policy of the Government of the Republic of Kazakhstan (hereinafter - Government) and the National Bank of Kazakhstan (hereinafter - National Bank) is to maintain macroeconomic and financial stability and economic growth and competitiveness increase of Kazakhstan's economy.

The main directions of economic policy in 2015:

1) adopting countercyclical economic policy through the implementation of the State program of infrastructure development "Nurly Zhol" for 2015 - 2019, increasing the competitiveness of Kazakhstan's economy and supporting small and medium-sized enterprises;

2) maintaining macroeconomic stability;

3) ensuring financial stability by strengthening the financial system and the recovering the
banking sector.

1. Countercyclical economic policy
Policy of Government and National Bank will aim to achieve the target parameters of real economic growth for 2015 at the level of 4-5%.

1 trillion tenge has been allocated from the National Fund of the Republic of Kazakhstan on the initiative of the President in February 2014 to support economic growth and employment in 2014-2015.

The second tranche in the amount of 500 billion tenge in 2015 will focus on additional concessional lending to small, medium and large enterprises and rehabilitation of the banking sector in the framework of these funds. In addition, the construction of infrastructure free economic zones and "EXPO 2017" will be financed.

The New Economic Policy "Nurly Jol" will be implemented to ensure sustainable economic growth and employment support, 3 billion dollars will be allocated annually from 2015 to 2017 for the implementation of this policy from the National Fund of the Republic of Kazakhstan.

The state program of infrastructure development "Nurly Zhol" for 2015 - 2019 provides for the development of infrastructure in 7 main areas. That is development of transport and logistics, energy and industrial infrastructures. In addition, the modernization of public utility, water and heat supply networks, construction of schools and housing, as well as support for small and medium-sized businesses will be implemented.

Implementation of projects in the field of small and medium enterprises (hereinafter - SME) will be launched in conjunction with the international financial institutions, as well as the modernization of public utility, road construction, development of electric power, renewable energy, and institutional reforms in the amount of 13.5 billion US dollars, 9 billion US dollars of them will be financed by international financial institutions.

The new economic policy will focus on further structural reforms in our economy. That is competitive growth and productivity increase in sectors of the economy, improving the economy structure through the development of transport, energy, industrial and social infrastructure, small and medium-sized enterprises.

Investments in these areas will create the greatest multiplier effect for economic growth and employment and will form the basis for future sustainable growth.

Support for Kazakhstan's exports will be provided to support the positive foreign trade balance. Mechanisms of trade and export financing will be developed at rates not exceeding the rates applicable for exporters in the EU (2-3% in foreign currency).

Policy for further industrialization of the country's economy will be held in the second five-year industrial and innovative development, aimed at the development of the manufacturing industry in certain priority sectors considering regional perspective.

200 billion tenge will be allocated to further support business activity in the country from the National Fund of the Republic of Kazakhstan in 2015-2016. These funds will be used for lending to small, medium and large enterprises, using existing programs of interbank lending JSC "Entrepreneurship Development Fund "Damu" and JSC "Development Bank of Kazakhstan", 100 billion tenge - to finance SMEs and 100 billion tenge - to finance large enterprises.

Implementation of SME lending in the national currency will be continued through borrowing from international financial institutions in order to reduce the debt burden on dollar loans and avoid folding the business activity of SMEs.

Support of the lending growth to small and medium-sized enterprises will be continued under the Business Road Map 2020, the expansion of leasing operations, project financing NPFIID 2 to stimulate the growth of investment expenditures of the business sector, the financial support of agro-industrial complex - in the framework of the "Agrobusiness 2020".

Measures will be taken to ensure employment within the Roadmap employment 2020.

2. Macroeconomic stability will be achieved by coordinated monetary and fiscal policy and curb inflation in the planned corridor of 6-8%.

The basis for the transition to inflation targeting in the medium term will be created in the monetary policy. Inflation targeting will increase the real yield savings in tenge and reduce inflation expectations.

Regulation of the money supply will be carried out in correlation with inflation.

Monetary policy will aim at ensuring balance between internal and external competitiveness of Kazakhstan's economy.

In this case, the sharp fluctuations of tenge exchange rate will not be tolerated. Measures for curb speculation in the foreign exchange market will be accepted. In 2015, National Bank jointly with Government will make changes to the legislation in part of increasing performance requirements of exchange points for cash foreign exchange market.

Policy to maintain international reserves of the National Bank at adequate level will be continued through the prevention of decline in gold reserves of National Bank below 3 months volume of goods and services imports.

Fiscal policy will be aimed at balancing the budget in accordance with the Conception of new fiscal policy. Tax policy will be aimed at improving the investment attractiveness of the economy and stimulating the growth of manufacturing industries. At the same time increase in the tax burden on businesses is not provided.

The main approaches of formation of fiscal policy are to determine the budget expenditures within the fiscal restrictions on the deficit, gradual growth of government responsibilities, and avoidance of substitution of private sector investment with budget investments.

External loans from international financial organizations will be involved in order to reduce pressure on the republican budget for financing infrastructure projects on condition of co-financing and mechanisms of public-private partnerships will be used.

3. Financial stability will be maintained with complex regulatory measures aimed at minimizing the negative effects caused by possible global imbalances in the world economy, as well as ensuring the stable functioning of the financial system. A package of measures to ensure financial stability will be conducted in accordance with the Conception of development of the financial sector of the Republic of Kazakhstan until 2030.

The main policy priorities of regulation of the financial system in 2015 will be:

1) enhancing the role of the national currency in the economy;

2) stimulating the growth of tenge liquidity of banks to further increase of lending to the economy;

3) recovering the banking sector.

1. The following measures will be taken in order to enhance the role of the national currency in the economy:

1) payout amount guaranteed to depositors of JSC "Kazakhstan Deposit Insurance Fund" on deposits in tenge will be increased from 5 million to 10 million tenge with increase of its capitalization in order to generate savings in tenge;

2) the maximum recommended rate of interest on guaranteed deposits in dollars will be reduced from 4% to 3% per annum;

3) prevent the installation of the prices of goods and services in units will be introduced.

2. The following measures will be taken in order to stimulate the growth of tenge liquidity of banks to further increase lending to the economy:

1) the possibility of a temporary reduction of certain norms of prudential regulation, if necessary, will be considered;

2) tenge liquidity will be provided to them in order to prevent a liquidity shortage in the commercial banks;

3. The following measures will be taken for the purpose of restoration of the banking sector:

1) the level of bad assets reduction efforts will be continued. The authorized capital of JSC "Fund of problem loans" will be further increased by 250 billion tenge, enhancement of efficiency efforts of its cooperation with banks is continued.

Priority orientations will be the improvement of other mechanisms on troubled assets work, including activities of organizations to manage non-performing assets, tax issues (tax administration);

2) new standards for capital adequacy of banks "Basel III" will be phased in regulatory policy. Soft requirements will be established for banks in terms of capital adequacy, capital components for the purpose of smooth and painless transition to the new standards in the first phase. National Bank will monitor the implementation of the new capital adequacy requirements by banks in view of the current economic situation.

In general, the economic policy in 2015 will be aimed at mitigating the effects of negative external factors, strengthening the stability of the socio-economic situation in the country.

Tasks on improving the financial sector, maintaining macroeconomic stability and competitiveness of Kazakhstan's economy will be solved through the diversification of the economy.

These measures will be balanced to maintain achieved positive results of macroeconomic development of the country and ensure further sustainable economic growth.
In the case of deterioration of the situation in foreign markets, Government and National Bank will take additional measures to preserve social and economic stability in the country.