Kazakhstan 2014 | DIPLOMACY | YEAR IN REVIEW

Solid growth over 2013—GDP came in at 6% according to the World Bank—set Kazakhstan apart from other emerging markets, many of which struggled over US Federal Reserve tapering concerns and instability in Russia's ruble. External pressures did, however, force officials to permit a 18.9% devaluation in the tenge against the US dollar in early 2014, leading to concerns of increased inflation—according to the Statistics Agency, inflation was at 4.8% at end-2013, with the Asian Development Bank (ADB) predicting the indicator will come in at 11.5% at end-2014, before recovering to 8.8% in 2015. For 2014, the ADB predicts another 6% growth figure, although it could have been higher; delays in getting the long-awaited Kashagan oil field online could have cost the economy 0.5 percentage points in growth, according to government officials, with cracks in a key pipeline setting the $50 billion project back a year or two in April. It was news the government could have done without as it looks forward to the increased revenues Kashagan will bring; public consumption grew at a slowed 1.6% in 2013, while public investment plunged 10% as a result of fiscal tightening. That said, private consumption (up 16.1% in 2013) and private investment (up 12% over the same year) rode a wave of credit growth over the year, more than making up for the temporary slowdown in government spending. GDP per capita now stands at $13,000, suggesting the country certainly hasn't squandered its hydrocarbon resources. Despite a fast-moving diversification process, however, the oil and gas sector still represents nearly one-quarter of GDP, up from just 10.9% in 2001, according to Ernst & Young (EY), while exports in the category account for approximately 90% of the total.

Elsewhere, the country's accession to the World Trade Organization (WTO) ran into fresh technical troubles that are under study. Kazakhstan posted a trade surplus of $33.6 billion over 2013, down 29.7% over the year according to the Statistics Agency. Exports dropped by 4.6% to $82.5 billion, while imports were up 5.4% to $48.9 billion. One of a trio of countries in the Customs Union, trade with the other two, Russia and Belarus, represented $5.86 billion in 2013, down 5.9% YoY. Indeed, Kazakhstan is looking to diversify its export routes considerably over the coming years, with new infrastructure aimed at just that expected to boost access to foreign markets—in terms of wheat, one of the country's main exports, just 20% found its way into non-former Soviet countries in 2013 compared to over 40% just a couple of years ago. Eyes will now be on 2014 results in terms of wheat exports, with the sector having grown 10.8% in 2013 on the back ofimproved harvests after tough climatic conditions in the previous year. And in terms of transport infrastructure, the government has earmarked $32 billion of public and private investment in order to realize its ambitions. Much of that will go toward funding the development and renovation of thousands of kilometers of roads and railway in order to better link Europe with China. Representing 7.5% of GDP in 2013, the transport sector is more than worth the effort, and development in the area is key if the country is to diversify its export markets. Kazakhstani exporters could, however, soon find themselves with an expanded market in the region, as Customs Union members hope to see the bloc transform into the Eurasian Economic Union in coming years, with Kyrgyzstan, Tajikistan, and Armenia possible candidates.

In other 2013 news, Kazakhstan surprised tourism observers, ramping up international arrivals by 21.9%, according to the UNWTO, with over 6 million guests expected in 2014. The sector accounts for 1.6% of GDP directly and supports 137,500 jobs. The capital, Astana, will also mark itself firmly on maps when it plays host to the World Expo 2017 in just a few years, with work already underway to prepare the city for an influx of up to 3 million extra arrivals between June and September 2017. In other sectors, the retail market—retail sales grew 12.5% on average between 2010 and 2013—is providing a boon to the real estate industry, with growing demand for formal shopping destinations keeping constructors busy.

As we move further into 2014, Kazakhstan will have to be content with being a large oil producer, rather than a giant—production was at 81.8 million tons in 2013, up 3.2% YoY, but delays at Kashagan in the northern Caspian Sea mean it's unlikely the oil will begin to flow until 2015 or 2016, as work is done to repair a 200-kilometer stretch of cracked pipeline. The field has proven recoverable reserves of 761.1 million tons, compared to the 1.1 billion tons at the Tengiz field, and could bring the country in line with Libya in terms of oil produced per year when it begins to pump.

Having weathered the global financial crisis in 2008, Kazakhstan has managed to remain robust and build on its previous economic success. Seen as the most investment-worthy location in Central Asia, Kazakhstan is also seeking to transform itself into a key transport hub between Europe and Asia, with an increasingly prosperous population.