THE WORLD ECONOMIC CRISIS AND ITS IMPACT ON THE ECONOMIC DEVELOPMENT OF THE CENTRAL ASIAN COUNTRIES
Abstract
In the Central Asian (CA) countries, the world crisis has mainly had an impact on the financial and investment sphere. The region does not have enough of its own economic resources to overcome the consequences, so it will have to turn for the most part to influential neighbors.
The nature and manifestations of crisis phenomena depend on the level of development and integration of the economic systems of different states into the world economy.
Let’s take a look at the situation that has developed in the CA countries under the influence of the world financial crisis, as well as at the possible ways to overcome it and the prospects for the region’s further development.
Since the crisis began, there has been a significant drop in the growth rates of the macroeconomic indices in Kazakhstan’s economy. The 2008 year-end results were not encouraging—the financial and economic spheres had obviously experienced a slump.
By the end of 2008, however, the powers that be had managed to halt the decline in financial indices. But it was the lower investment activity and difficult financial situation in the banking sector in 2007 that led to the economic crisis. This is confirmed by the data of Kazakhstan’s Statistics Agency.1
The GDP index for 2008 amounted to 103.2% compared to the previous year. Goods production accounted for 45% and services for 52.5%. The total production volume decreased by 2.2% (3,045.9 billion tenge) from January to June 2009 compared to the same period in 2008, giving rise to a corresponding change in the aforementioned indices—36.3% (goods) and 65.8% (services).2
The production branches—oil and mining—suffered the most from the crisis. The drop-in growth rates in these branches corresponds to the downward trends in economies throughout the world. This reduction in production volume led to a change in the sectoral and geographic structures of the country’s industry.
The year 2008 was marked by a sharp decrease in Kazakhstan’s oil export revenues. The drop in world oil prices in 2009 prompted a decrease in oil production of 3 million tons, contrary to the government’s official forecast (77 million tons).3 In addition, the Ministry of Economics is expecting a drop in production volume (of approximately 1%) in the metallurgical industry.
However, in the first half of 2009, particularly in June, industrial production indices grew (see Figure 1); compared with May 2009, accelerated growth rates were seen in the mining (6.3%) and processing industries (9.9%). Crude oil and metallic ore production and the output of the machine building, metallurgical, and food industries, including beverages and tobacco, increased.
The economic crisis in Kazakhstan is having a negative impact on the rise in the price index. By the end of 2008, prices reached an all-time high at every level. For instance, the consumer price index in December 2008 compared to December 2007 amounted to 109.5%. Food prices grew by 10.8%, non-food prices by 5.7%, and the cost of services by 11.4%. The prices for industrial products put out by manufacturing enterprises dropped by 18.6% in December 2008 compared to December 2007.4
The situation improved slightly in the first half of 2009. In June 2009, the consumer price index amounted to 103.9% compared to December 2008. Food prices grew by 3.5%, non-food prices by 4.9%, and the cost of services by 3.3%. In June 2009, industrial product prices increased by 9.7% compared to December 2008.
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References
Data of the Kazakhstan Statistics Agency, available at [http://www.stat.kz/news/Pages/].
Data of the Kazakhstan Statistics Agency, available at [http://www.stat.kz/news/Pages/n_15_07_2009_3.aspx].
According to the data of the State Statistics Agency, in 2008, 58,713,800 tons of crude oil and 12,024,100 tons of gas condensate were produced in Kazakhstan. This is 6.2% and 1.4% more, respectively, than in 2007. At a price of 40 dollars a barrel, it stands to reason that some fields can permit themselves a cutback due to a drop in profitability, available at [http:// regnum.ru/news/1112677.html].
[http://www.stat.kz/news/Pages/n_17_03_09.aspx].
Kazakhstan President Nursultan Nazarbaev believes that a single world currency should be created. According to the Kazinform Agency, the head of the Kazakhstani state said this at a business forum in Delhi. Whereby the head of Kazakhstan, who has previously made statements in favor of the idea of creating regional currencies, spoke against this initiative this time. According to him, such fragmentation could lead to “great chaos.” “I think that the future measure consists in having an entirely fair world currency and not one issuer, as we have just now. This is an undemocratic, un-free, uncompetitive, and uncontrollable world currency. Instead of this, countries should come to terms on creating a world currency unit for exchanging goods that would be adopted by the U.N. and controlled by corresponding commissions, and we would have something to do with this currency,” said Nursultan Nazarbaev, available at [http:// www.regnum.ru/news/
html].
The 24.kg IA presents these data with reference to the Kyrgyzstan National Statistics Board.
[http://www.24.kg/economics/2009/25/01/107969.html].
Within the framework of the New Economic Policy defined by the Kyrgyzstan president on 10 January, 2008, a Plan of Action for the country’s government has been drawn up and approved for 2008, and a draft of its development strategy prepared (2009-2011). With the assistance of the Ministry of Economic Development, strategies and programs of socioe-conomic development of the regions for 2008-2011 have been prepared and approved in compliance with the new meth-odology and in keeping with the objectives and assignments envisaged in the draft of the development strategy renewed until 2011. In addition, the conception of a state regional policy has been drawn up that envisages accelerated development of the regions.
Ratings are compiled taking into account such parameters as human rights, democratic elections, freedom of speech,protection of minority shareholders, freedom of trade, low inflation, low profits tax, investment volume, and stock exchange indices. The top from Forbes is based on the assessments of the World Bank, Transparency International, World Econom-ic Forum, Freedom House, the American Chamber of Commerce, the CIA, and several other organizations, available at [http:/
www.24.kg/economics/2009/03/20/109765.html].
The precise consumer price index for the year-end results of 2008 amounted to 20.1%.
[http://www.madein.kg/ru/Finances/item1245_21012009].
According to the CIS Statistics Committee, in 2008, the amount of investments in basic capital increased by 10%on average throughout the CIS compared to 2007. In some countries, a decrease in rates of 11% was noted. This is shown by the data of the Commonwealth’s Interstate Statistics Committee. In the Commonwealth’s other countries, the dynamics are positive. Tajikistan is the leader in terms of an increase in investments in basic capital for the second year running. This is associated with the construction of hydropower facilities. In addition to Tajikistan, the other members of the top three-some are Azerbaijan (34.3%) and Uzbekistan (22.4%). Among the outsiders, apart from Kyrgyzstan, are Armenia (growth at a level of 1.7%), Kazakhstan (4.6%), and Ukraine (4.7%) (see: [http://www.cis/2009/02/12/106105.html]).
[http://www.24.kg/economics/2009/03/20/109731.html].
According to this index, Kyrgyzstan ranks second in the Commonwealth after Tajikistan, where the percentage of foreign investments in the total amount of investments topped 70%. 28.8% of the investments in Kyrgyzstan were attract-ed in the form of household funds, 25.3% by means of enterprises’ and organizations’ own funds, and 11.5% in the form of budget investments.
Data of the Kyrgyzstan National Statistics Committee. Express information of 7 July, 2009, available at [http://
tat.kg/].
[http://www.24.kg/economics/2009/07/10/116023.html].
Earlier, the IMF forecast an 8% increase for the country in 2008.
Data of the Tajikistan State Statistics Committee, available at [http://www.state.tj].
Although the country is still mainly oriented toward growing cotton plant, this sector has been experiencing sig-nificant losses since the collapse of the Soviet Union in 1991. Between 2003 and 2007, when the prices in the world goods markets dropped, the percentage of cotton plant growing in the volume of the GDP decreased from 9 to 2%.
On the National Bank’s website, one dollar is equal to 3.4190 somoni.
Data of the Tajikistan State Statistics Committee, available at [http://www.state.tj].
The Uztransgaz Company informed the Tajik side that the price of the blue fuel to be delivered in 2009 would more than double—to 300 dollars per thousand cubic meters of fuel. This price did not suit Tajikgaz. Its representatives say that in the context of the global economic crisis the price of energy resources is dropping in the world markets. In 2008, Tajikistan imported gas at 145 dollars per thousand cubic meters from Uzbekistan, which was 1.5-fold higher than the price for 2007.
Data of the official statistics, available at [http://www.regnum.ru/news/].
From the speeches of officials, available at [http://www.gazeta.uz/2009/07/18/gdp/].
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