ECONOMIC RESEARCH INSTITUTE ANALYSIS OF ECONOMIC PROCESSES IN THE REPUBLIC OF KAZAKHSTAN April 2011

ECONOMIC RESEARCH INSTITUTE

ANALYSIS OF ECONOMIC PROCESSES ANALYSIS OF ECONOMIC PROCESSES IN THE REPUBLIC OF KAZAKHSTANIN THE REPUBLIC OF KAZAKHSTAN

AprilApril 2011 2011

ContentContent::

GDP structure for 2010

Money-and-credit and financial sectors

Macroeconomic indicators

Foreign trade turnover

Implementation of State Budget

Real sector

Social sector

Conclusions

GDP structure forGDP structure for 2010 2010

% of corresponding period of previous year

structure in% of GDP bln. tenge

Volume index Deflator

GDP 21 513,47 107 115,3 100Production of commodities 9 490,40 105 117,7 44,2Agriculture, forestry and fisheries 940,60 88,3 103,4 4,4Manufacturing industry 6 943,20 109,6 125,1 32,3Mining and quarry development 4 018,62 105,3 125,7 18,7Secondary production 2 468,29 118,4 123,9 11,5Electricity, gas, steam and air conditioning 390,03 104,1 127,6 1,8Water supply, sewage system, control over the collection and distribution of waste 66,26 104,8 119,7 0,3Construction 1 606,59 101 100,3 7,5Production of services 11 391,34 106 113 52,8Wholesale and retail trade, repair of motor vehicles and motorcycles 2 832,19 112 122,2 13,2Transportation and warehousing 1 613,19 107,4 105,6 7,5Facilities for accommodation and meals 170,91 101,7 117,3 0,8Information and communication 520,22 110 81,5 2,4Financial and insurance activities 1 333,50 97,6 107,3 6,2Real estate 1 877,76 103,8 120 8,7Professional, scientific and technical activities 841,40 106,1 112,1 3,9

Activities in the field of administrative and support services 418,33 107,3 109,7 1,9Public administration and defense, compulsory social security 417,09 102,4 116,9 1,9Education 674,95 103,5 118,4 3,1Healthcare and social services 375,44 105,1 120,2 1,7Arts, Entertainment and Recreation 128,81 104,5 121 0,6Other service activities 171,89 109,3 110,6 0,8Activities of households as employers of domestic workers and produce goods and

services for own consumption 15,67 100 113,2 0,1Total Industry 20 881,73 105,5 115,1 97Indirectly measured financial intermediation services -482,74 74,5 119,5 -2,2Gross value added 20 398,99 106,5 115 94,8Net taxes on products and imports 1 114,48 116,7 122,1 5,2

According to the report GDP amounted to 21,513.5 billion at the current prices in a year. Real GDP grew by 7% compared to the same period of 2009.

GDP deflator for the period also increased in comparison with the previous year and amounted to 115.3%.

The industry share in GDP increased and totaled at 32,3% in comparison to 2009. The construction share has decreased by 7,5% in 2010 and 9,1% - in 2009.

The share of manufacturing goods in GDP was 44.2%, services - 52,8%.

Money-and-creditMoney-and-credit andand financialfinancial sectorssectors

Deposits attracted Deposits attracted The total volume of residents' deposits in depository institutions in January 2011

increased by 1,6% to 7,513.8 billion tenge. Corporate deposits rose by 2.0% to 5,304.9billion and deposits of individuals - by 0.6% to 2208.9 billion.


Credit activityCredit activity,, bln bln KZT KZTThe total volume of bank lending economy in January 2011 decreased

by 0.3% to $ 7,572.9 billion.


Key indicators of the monetary systemKey indicators of the monetary system

Money Supply Money Supply In January 2010, money supply grew by 0.7% to 8,608.6 billion tenge (from the beginning of the year - an increase of 0,7%) due to growth in net external assets of the banking system.In January 2010, total cash in circulation decreased by 4,7% and amounted to 1,094.8billion tenge.

Key indicators of the monetary systemKey indicators of the monetary system::

Monetary baseMonetary baseThe monetary base in February 2011 decreased by 0,43% due to reduction of net external assets of the National Bank and consisted 2,630.1 billion tenge. Narrow monetary base, without taking into account urgent deposits of banks with the National Bank decreased by 2.5% to 2143.0 bln. tenge.


Dynamics of major currenciesDynamics of major currenciesExchange rate of KZT to USD changed in the range 146,0-146,96 Tenge per USD

in February 2011. Over February 2011 Tenge has appreciated by 0.6% and at month-end exchange rate of Tenge was 146.02 per U.S. dollar.Volume of stock transactions on the Kazakhstan Stock Exchange, taking into account transactions on additional auctions has increased in comparison with January 2011 by 27,9% and amounted to 7.1 billion dollars. Volume of transactions on-the-counter foreign exchange market decreased by 12.7% to 2.7 billion dollars.


Macroeconomic indicatorsMacroeconomic indicators

Inflation rateInflation rateThe consumer price index was higher in February 2011 than in February 2010; as a

result the inflation rate in February 2011 amounted to 8,8% in annual terms.

Investments in fixed assetsInvestments in fixed assetsInvestment in fixed assets in January-February 2011 compared with the corresponding

period of last year increased by 16,4% and amounted to 411.6 billion Tenge. The significant proportion in the total investment in fixed assets in January-February 2011 occupied mining and quarry development (47,5%), transportation and warehousing (14.3%), real estate transactions (10.7%).



Retail tradeRetail tradeRetail trade turnover amounted to 511.9 billion Tenge in January-

February 2011, and increased by 16,2% to the reporting period of 2010. Despite the drop of retail Volume index for a month to 7,8%, which is associated with a traditional slowdown of business activity in the beginning of the year, there is an increase of 9,9% in annual terms.

Foreign trade turnoverForeign trade turnover

Foreign trade turnover in January 2011 amounted to 6.0 billion USD (compared with January2010. increased by 5,1%), including export - 4,2 billion U.S. dollars (0,7% less) and import -1.8 billion U.S. dollars (21,8% more). Exports with the countries of the Customs Union was 510.7 million U.S. dollars or 47.4% more than in January 2010, imports - 796.2 million USD (64,5% more).

In the total turnover the share of exports in the accounted period is 70%,

import - 30%. Favorable market conditions in world commodity markets and the growth of production in export-oriented sectors contributed to the increase of foreign trade turnover for the period.


Exports of goodsExports of goodsExports fell in January 2011 by 0,7% and amounted to 4,2 billion U.S. dollars.A significant proportion of the commodity structure of exports occupy mineral products (in January 2011 - 70,5%).The main partners of Kazakhstan for export in the period of January-October 2010 were China (17.8%), Italy (13,1%), Russia (11,9%) and Germany (7,7%).


Importing goodsImporting goodsImports in January amounted to 1.8 billion dollars and increased by 21,8% to the reporting period of the last year. Imports are growing due to increased imports of machinery and equipment (up 31.8%) and trucks (up 84.7%). The import of passenger cars greatly reduced (66.5% reduction) due to a reduction in consumer demand and customs duties on imported cars.Kazakhstan's main partners for imports are Russia (43,3% of total imports), China (14,8%), Ukraine (6,1%) and Germany (5,0%).

Implementation of State BudgetImplementation of State Budget

State budget revenues as of March 1 totaled 718.5 billion tenge or 85% of the plan. Compared to the same period last year, revenues increased by 24,8% mainly due to tax revenues. Tax receipts during the reporting period this year amounted to 649.7 billion tenge exceeded plan by 26,5%. Compared with the corresponding period last year there is an increase of 42%.

Expenditures amounted to 636.9 billion tenge or 85.4% of the plan on payments for the reporting period. The major share in the state budget expenditures during the reporting period, which is typical for the state budget of Kazakhstan, take care and social welfare(30.6%), education (16,8%), and health (16.9%).According to the results of February the state budget was formed with a surplus of 20 billion tenge.

Real sectorReal sector

IndustryIndustryIndustrial output (goods and services) in January and February of this year amounted to2 311.8 bln. tenge. In comparison with the last year Volume index of industrial production amounted to:105,3% to the same month and 98,7% to the previous month.Thus, in annual terms, growth is continuing in industrial production. However, during the reporting month (compared to January of this year) against decrease in performance in many sectors there is reduction of production volume index of industrial products by 1,3%.In 2011 the leading position on the annual increase of Volume index retained by the manufacturing industry - 7,7%. This trend continued during the last year and takes place at the moment. Particularly significant for the year increased production Volume index of computers, electronic and optical products (164.8%), machinery and equipment(127.2%), manufacture of motor vehicles, trailers and semitrailers (209.7%), furniture(157, 7%).


Production and consumption of electricityProduction and consumption of electricityIt was produced 7 710million kWh in February 2011. In comparison with the previous month there was a decrease of electricity generation by 10,1%, which is related to the end of the heating season. Compared with February of last year electricity production increased by 5%.Consumption of electricity in February 2011 amounted to 7 664.8 million kWh, down for a month by 11,2%. For the year consumption rose by 2.7%.Surplus in February 2011 in the country was 44.9 million kWh.


Loading and unloading of goods by railLoading and unloading of goods by railThe increase in turnover in February 2011 compared with the reporting period of previous

year (14,8%) is due to an increase in rail freight, pipeline and road transport, whose share in total turnover is high (54,6%, 26,0% and 18,6% respectively).Cargo turnover in February of the current year amounted to 29,899 million tone-kilometers(tkm), which is 14,8% more than in 2010. Turnover of goods by rail has demonstrated an annual increase by 7,4%. The main factor of increase in the industry - a substantial recover of cargo, which is observed by all modes of transport from mid-2009 due to the growth of industrial production.In terms of commodity groups in February there was a slight decrease in shipments for all groups. Oil (by 9,8%), iron ore (by 8.7%), non-ferrous ores (by 4,7%), and ferrous metals (by 7.9%).

Social sectorSocial sector

Employment and unemployment 8,141 thousand people were occupied in the economy of Kazakhstan in the 4 th quarter of 2010. With respect to 4th quarter of 2009 their number increased by 204 thousand persons or by 2,6%. During the 4 th quarter employment fell by 30 thousand persons or by 0,4%. The unemployment rate in the 4th quarter amounted to 5,5%, decreased compared to the 4 th quarter of 2009, as well as to the 3rd quarter of this year.

ConclusionsConclusions::

Real sector. . The stabilization is noticed in industry; Volume index to the reporting period of previous year has grown steadily.A similar situation in the trade sector. Revitalizing the economy as a whole, in particular increasing the income of the population contributed to stabilization of the real sector.

Lending to the economy. As before, a large proportion of bad loans is a major systemic risk of banks, but their volume, according to the banks estimation is stabilizing. Credit policy of banks contributes to revive lending.Growth in world energy prices has put upward pressure on Tenge, helped to restore confidence in the national currency, which caused the growth of deposits during the reporting period.

Inflation. The rate of inflation since the beginning of the year amounted to 3,2%, while in the same period last year it was 2,3%. Factors of inflation increase were: positive trend in energy prices, lower food production (food prices are still growing rapidly), and seasonality. Risk to the inflation acceleration is primarily an unstable situation on the world stage that is quite capable of affecting the economy of Kazakhstan.

Exchange rate. At the moment there is a period of commodity currencies strengthening. Tenge is not an exception. There is a stable tendency of Tenge growth in recent months . In this case, all existing conditions favor the fact that Tenge trend may continue over a period.

Thank you all for your Thank you all for your attention!attention!

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ECONOMIC RESEARCH INSTITUTE ANALYSIS OF ECONOMIC PROCESSES IN THE REPUBLIC OF KAZAKHSTAN April 2011