SHAPING TOMORROW: REFORMS FOR LASTING PROSPERITYKAZAKHSTAN ECONOMIC UPDATE - WINTER 2023-24Macroeconomics, Trade & InvestmentPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedMacroeconomics, Trade & InvestmentKAZAKHSTAN ECONOMIC UPDATEWinter 2023-24SHAPING TOMORROW: REFORMS FOR LASTING PROSPERITYTable of ContentsFOREWORD AND ACKNOWLEDGEMENTS 4OVERVIEW 5I. THE EXTERNAL ENVIRONMENT 7II. ECONOMIC GROWTH AND INFLATION 10III. THE EXTERNAL BALANCE 13IV. THE FINANCIAL SECTOR 14V. FISCAL POLICY 15VI. ECONOMIC OUTLOOK AND RISKS 17VII. SPECIAL SECTION: REFORMS FOR LASTING PROSPERITY 21GROWTH CHALLENGES AND STRUCTURAL WEAKNESSES 22LIMITED DIVERSIFICATION AND LOW MANUFACTURING BASE 27UNEVEN LEVEL PLAYING FIELD AND THE DOMINANCE OF SOES 28Policy reforms to raise productivity and market contestability 30A LOW HUMAN CAPITAL BASE 31Policy reforms to boost human capital 32STALLED TRANSFORMATION AND LOW MOBILITY 32Policy reforms to facilitate spatial transformation and regional development 33A HEAVY CARBON FOOTPRINT 34Climate actions 35FISCAL POLICY FRAMEWORK IN A DECARBONIZED FUTURE 35REFERENCES 37SHAPING TOMORROW: REFORMS FOR LASTING PROSPERITY4Foreword and Acknowledgements The Kazakhstan Economic Update (KEU) is a semi-annual report analyzing recent economic developments, prospects, and policy issues in Kazakhstan. The report draws on data available through December 2023 as reported by the Government of Kazakhstan, the National Bank of Kazakhstan (NBK), and additional information collected as part of the World Bank’s regular economic monitoring. This report was authored by Azamat Agaidarov (Economist), with contributions from David Stephen Knight (Lead Economist, Program Leader) and Natasha Sharma (Senior Economist). It draws upon the World Bank’s extensive analytical work on Kazakhstan, incorporating findings from the Country Economic Memorandum 2022: Dependence, Distance, Dispersion - Options for Upgrading Kazakhstan’s Economy (led by Somik Lall, Ivailo Izvorski); Kazakhstan: Country Climate and Development Report 2022 (led by Daniel Besley, Sandeep Kohli), Public Finance Review 2023: Strengthening Public Finance for Inclusive and Resilient Growth (led by Sjamsu Rahardja, Kathrin Plangemann), Boosting Productivity in Kazakhstan with Micro-Level Tools: Analysis and Policy Lessons (led by Mariana Iootty, Asset Bizhan and Paulo G. Correa), and Policy Notes (developed by sector teams). The team would like to thank Miguel Eduardo Sanchez Martin (Senior Economist, Program Leader) and David Elmaleh (Senior Economist) for their valuable comments and suggestions, and Tatiana Proskuryakova (Country Director for Central Asia), Andrei Mikhnev (Country Manager for Kazakhstan), and Antonio Nucifora (Practice Manager) for their guidance. Gulmira Akshatyrova (Program Assistant in Astana) and Mismake D. Galatis (Program Assistant in Washington, DC) provided excelle...
