As the oil patch goes, so
goes Kazakhstan. Roughly a fourth of its economy depends directly on its global
sales of oil and gas; so it rises and falls with oil prices, which are as
volatile as gasoline fumes. Kazakhstan should steady its economy by
diversifying. Or so people argue.
But a new study suggests
that Kazakhstan already has a bulwark against the flighty oil sector. It’s called
“the government.”
That’s surprising. Since
becoming independent in 1991, Kazakhstan has chopped away at the government’s
role in the economy. Today government consumption accounts for only about 12% of
the economy (measured as gross domestic product, or GDP), according to the
national Committee on Statistics. By Western standards, that’s low. But when
the government does spend, it may make every tenge count, by concentrating on
such strategic industries as banking. Kazakhstan gets slightly more bang per buck
from the government than from oil.
Those ruminations arise
from a statistical study of the effects of oil prices on Kazakhstan’s economy
over time. In her master’s thesis at KIMEP University, Aliya Zhanadil finds
that a 10% rise in oil prices relates to a 5.3% rise in GDP per capita (adjusted for price changes). That’s in line
with other studies. What’s new is that government spending has a slightly
bigger impact on the economy than oil does. A 10% rise in government spending
increases GDP in the next quarter by 6%.
These are direct
effects. Of course, oil prices also
affect the government’s revenue, since it taxes exports; so they may influence
GDP indirectly. But this effect looks small.
A 10% increase in oil prices raises government spending over nine months
by only six-tenths of a percent, perhaps because Astana saves much of the oil revenue
in its rainy-day account, the National Fund.
In any case, the indirect effect on GDP of the 10% oil-price increase is
a boost of only four-tenths of a percent.
Zhanadil’s results control for the labor force and the average level of prices (which may proxy for economic instability), neither of which had much additional effect on the size of the economy. The dataset covered all quarters in the period from 2000 through 2016.
The man on the street
would probably tell you that oil matters more to Kazakhstan’s economy than the
government does. One reason for this
mistaken impression may be that black gold has an oversized immediate impact on
GDP. The impact fades in the next two quarters, so that the net effect after
nine months is more modest than we realize. On the other hand, government
spending has a sustained impact on GDP for at least six months, perhaps because
it is less chaotic than oil prices.
People spend most of the 100,000-tenge check from the government because
they know that they will get another check on the next payday. Oil prices, on the other hand, come and go,
so people may save much of any windfall.
That's true for Astana, too. By banking windfalls, the National Fund can offset dips in GDP due to falling oil prices -- presuming that the government hasn't raided the Fund in the meantime as if it were a behemoth refrigerator that one can pilfer for midnight snacks.
That's true for Astana, too. By banking windfalls, the National Fund can offset dips in GDP due to falling oil prices -- presuming that the government hasn't raided the Fund in the meantime as if it were a behemoth refrigerator that one can pilfer for midnight snacks.
In sum, more than a
quarter-century after independence, Kazakhstan still has an economy with a few
socialist tics, like a conspicuous government.
– Leon Taylor tayloralmaty@gmail.com
Disclosure: I
advised Zhanadil’s thesis in the Master’s of Arts in Economics program.
References
Committee on Statistics
of the Ministry of National Economy.
Various statistics. 2018. www.stat.gov.kz
Zhanadil,
Aliya. The effects of oil price shocks on real GDP in Kazakhstan. Master’s thesis. 2018.
KIMEP University.
