ASTANA, OCT. 23 (The Bulletin) — In a rare candid assessment of the economic storm battering Central Asia and the South Caucasus, Kazakh President Nursultan Nazarbayev said the outlook for Kazakhstan’s economy was now worse than it had been during the 2007-9 Global Financial Crisis (Oct. 19).
Mr Nazarbayev’s comments, made during a meeting with Kazakh PM Karim Massimov and published on the Presidential website, were the most candid so far by one of the region’s leaders.
And any comparison with the dark days of 2007-9, when the economies of Kazakhstan and its neighbours reversed nearly a decade of sharp growth, will hit a nerve.
“Our people must know the current situation, profits at businesses are dropping, income is falling and there is the possibility of job losses,” he said.
“This is a real crisis — more powerful than in 2007-2009.”
In 2006, according to World Bank data, Kazakhstan had been powering along and enjoying GDP growth of over 10%.
This dipped to 9% in 2007 before falling in 2008 to around 3% and in 2009 to just over 1%.
Consumers and mortgage holders defaulted on debt repayments in 2008-9 and Kazakhstan’s government had to buy up bankrupt banks. Although the Kazakh economy has recovered, the experience left deep financial and psychological scars.
And the crash this time has been just as sudden as the 2007-9 Global Financial Crisis.
In 2007-9, sub-prime mortgages in the US started the rout. This time, a sudden fall in oil and commodity prices and a loss of confidence in Emerging Markets, including in China, have been the triggers.
Currencies across Central Asia and the South Caucasus have fallen by around 40%, inflation is rising and trade volumes falling.
Kazakhstan has built up cash reserves from oil and gas sales but Mr Nazarbayev said that, although social programmes would be supported, businesses would not be bailed out.
“Companies should not expect the State to give them the means to survive. This will not happen,” he said.
Other leaders across Central Asia and the South Caucasus may not have been as forthright as Mr Nazarbayev on the economic outlook but they are facing the same stormy conditions.
>>This story was first published on Oct. 23 in issue 253 of the weekly Conway Bulletin newspaper. For more information on the weekly newspaper covering Central Asia and the South Caucasus, go to www.conway.starbit.co.uk