Low oil prices seriously affect Kazakh economy, expert says

/By AzerNews/

By Aynur Karimova

The situation in Kazakhstan's economy is likely worse than it was predicted at the beginning of the year, Dosym Satpayev, the Director of the Kazakh Risk Assessment Group, believes.

"Since the end of last year, the Kazakh government is trying to prevent rising unemployment. The government has signed memorandums with large Kazakh enterprises that they will guarantee the preservation of jobs, or in the case of layoff of an employee, they will search another job for him/her," the expert told Trend on November 25.

On November 23, Kazakh Energy Minister Vladimir Shkolnik suggested that more than 40,000 employees of the oil and gas sector of the country could face layoffs, and wages will be reduced by a third if oil prices remain at a low level in 2016. Next year, the major international financial institutions expect the average price of Brent at $55-$58 per barrel.

"The statement made by Vladimir Shkolnik, says that the situation is worse than expected by the government. Most likely, the government expected that the economic situation will recover slightly by mid-year. But it turned out that the situation is worse - the price of oil dropped below $50. It is clear that it made our officials to be more pessimistic than they were earlier the year," Satpayev noted.

The expert believes that unemployment increases not only in the oil and gas sector, but almost in all sectors of the Kazakh economy.

"This year, an unfavorable economic environment evolved for Kazakh businessmen due to the fact that cheaper Russian and Belarusian goods entered the markets of the country, which made Kazakh producers uncompetitive," he stressed. "So, the problem is more serious."

A decline is observed in the attractiveness of Kazakhstan's labor market for foreign professionals, because since the recent significant depreciation of Kazakhstan's national currency-tenge, payment of wages in dollar terms does not correspond to their requirements.

Satpayev excluded the possibility that reduction of jobs in Kazakhstan will lead to labor migration from the country, as a similar deterioration in the economic situation is observed in the former Soviet Union and in foreign countries.

"To prevent unemployment in Kazakhstan, it is necessary to support SMEs - entrepreneurship, which could "pull" a considerable part of the labor force," he said. "This requires state policy of preferential crediting."

Satpayev also expressed hope that the situation with the low oil prices will force Kazakh officials to reconsider their approaches to the economy and to reflect more detailed on the development of the non-oil sector.

"Experience shows that high oil prices will not help improve the competitiveness of our economy. During these 20 years, we, unfortunately, did not establish an alternative economy, which could compensate for the current crisis in the mining sector," he concluded.