Kazakhstan’s Predicament

There’s no denying that Kazakhstan has big dreams, but what’s in question is whether it can manage the rocky economic road it finds itself on well enough to attain its declared goal of being a top-30 economy by 2050. The heart of Kazakhstan’s current trouble is economic, but social trouble may not be far behind if Astana cannot navigate the economic landslide it currently faces.

Between 2006 and 2009, Kazakhstan’s growth rate fell from 10.7 percent to 1.2 percent. In 2010, its growth rate rose to 7.3 percent – recovering from the dip, mirrored around the world, emanating from the 2007-2008 financial crisis. It’s not so much the GDP growth rate itself that’s important, but the general movement over the years and the suddenness of the drops. As economies mature, growth rates drop and stabilize – which is why a growth rate of 3 percent is viewed in the United States as good, but would be viewed as a crisis in much of the developing world. Kazakhstan may never see double-digit growth again, and that’s not in itself a bad thing. But because Kazakhstan’s economy has been so tightly linked to the oil industry, any tremors in that industry have a direct impact on the jobs of ordinary Kazakhs.

Oil prices peaked in the middle of 2008 at $146 per barrel (for West Texas Intermediate, or WTI, a grade of crude oil often used, like Brent crude, to benchmark oil prices) then crashed down to a low of $44 in February 2009 (adjusting for inflation). The most recent tumble in oil prices wasn’t as large a drop – from $106 in June 2014 to $50 in February 2015 – but the recovery hasn’t been as quick. By February 2009, a year after bottoming out, oil was back to $84. With the exception of a small blip this spring that saw oil back to $60 per barrel, the price has continued to drop. As of writing, WTI crude oil had fallen to about $40 per barrel.