MOSCOW: Kazakhstan and Kyrgyzstan, the countries in Central Asia, are worried over Russian’s customs union. Falling oil prices have already slowed down the economy of both countries and depreciated their currencies.
For Kyrgyzstan, the economic problems of Russia may cause a delay in the promised investments and a serious reduction of remittances from Kyrgyz labor migrants in Russia and their possible return home, with another potential element of unrest.
The growth of the Kazakh economy slowed down in 2015 to three percent. The fall of oil prices is not the only reason. The country is facing the growth of cheap imports from Russia and the decline of consumer demand. In addition, Standard & Poor’s confirmed short term sovereign credit ratings of Kazakhstan on foreign and national currency obligations on the level of A-2. According to forecasts from the agency, the GDP growth of Kazakhstan will slow down to 1.5 percent in 2015, whereas the GDP growth per capita will make up the average of 1.6 percent in 2015-2018.
Kazakhstan’s economic problems, S&P believes, are directly connected with the country’s dependence on the oil sector, the share of which accounts for 20-30 percent of GDP, over 50 percent of budget revenues and 60 percent of exports.
“Of course, Kazakhstan’s dependence on oil exports is considerable. In the structure of export income of the Kazakh budget, oil accounts for early 70 percent — about 55 billion dollars last year,” Ivan Ippolitov, a spokesman for the department of Central Asia of the Center for the Studies of Problems of near-foreign countries, an employee of the Russian Institute for Strategic Research, told Pravda.Ru. “Low oil prices promise hard times to Kazakhstan and other oil exporters, especially if low prices of oil last for a long period of time. The rate of the national currency, the tenge, reacts to negative events in economy. A year ago, the tenge lost nearly 20 percent of its value, which struck a blow on the population,” the expert told Pravda.Ru.
However, it appears that the devaluation of the national currency last year was only a start. Kazakh President Nursultan Nazarbayev has repeatedly warned local citizens that they would need to get ready for difficult times.
This may occur due the changing global situation, including the ongoing standoff between Russia and the West. It is important to realize that Kazakh oil exports go via the territory of Russia, on Russian pipelines and Russian ports. In addition, Kazakhstan largely depends on imports from Russia. Therefore, Russia’s economic problems affect Kazakhstan.
