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Kazakhstan's economy recovery could be gradual, the International Monetary Fund said Thursday. In the meantime, difficulties in the banking sector continued to affect the economy negatively.
The lender pointed out that the decline in economic activity appeared to have bottomed out, and an increase in oil production could help restor restore growth during the fourth quarter. However, it said credit expansion remained weak despite ample bank liquidity, and activity levels in the key construction and manufacturing sectors continued to be sluggish. Moreover, consumer income and demand is likely to pick up only with a lag, the IMF noted.
The lender expects the Kazakh economy to contract 2% this year, after it decreased 2.4% year-on-year in the first six months. But, the lender pointed out there were upside risks to the forecast. "The recent rebound in commodity prices, a record grain harvest in October, and the prospect of additional anti-crisis spending by year-end provide a more optimistic outlook for growth in 2010", it said.
Meanwhile, the IMF said Kazakhstan could face three policy challenges in the medium term. The first challenge was restoring confidence in the financial system, while withdrwaing public sector support. Secondly, gradually withdrawing stimulus-oriented spending and increasing saving of future oil revenues. The third challenge was allowing for greater flexibility of the exchange rate, the IMF added.
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