Global economic situation requires state budget changes: Massimov

Prime Minister of Kazakhstan Karim Massimov said that changes to the state budget were needed to support the Kazakhstan economy, Tengrinews reports citing IA Novosti-Kazakhstan.

On Friday, June 20, during the joint session of the Parliament, Massimov said that reserves from the National Fund would be redistributed to support new infrastructure and production projects. The changes will be due to the slowdown in Russian and Chinese economies that affect growth indicators in Kazakhstan.

“What are our main forecasts for economic development? More specifically we will be able to say only after six months; most likely, in September-October we will come to you with the changes to the budget and maybe with some new macroeconomic indicators for a more realistic view of the development of the economy by the end of the year,” Massimov told the MPs.

Touching upon the situation in the world economy, Massimov recalled that the crisis of 2007-2008 was caused by American markets, while the one of 2010-2011 hit the European markets hardest.

“Now, in 2014-2015, it is the turn of the developing markets. First and foremost, there are the markets of the countries that are our neighbors -  Russia and China. We are witnessing a significant slowdown in the economic growth in Russia and a reduced economic growth in China. This, of course, cannot but affect our large producers whose markets are located in these countries. And we are already observing that in the first five months of this year there has been some slowdown in exports of our major manufacturers to Russia and some other countries,” Massimov said.

He said that in order to mitigate the effects of this negative dynamics the government would support the traditional sectors of Kazakh economy, that is, raw materials sector which essentially “pays for the feast” by paying taxes that fill the budget and the National Fund. He also informed that in the past 2-3 months the government met with all the major Kazakhstani producers to hear about the challenges they were facing and see what could be done to help them.

Massimov outlined four directions, in which the government was planning to act to prop up the economy.

The first direction includes tax relief measures, changes to the tariff policies, market expansion to both Russia and China. “We are hoping that this will have a positive effect but we need to work tirelessly,” the PM said. He pointed out that there would be no job cuts and called it one of the “most significant elements”.

Massimov also said that the government would support the manufacturing industry in Kazakhstan.

The third direction is promotion of the innovative and knowledge-based economy. "It is the economy of the future, it is not something that will give us an immediate effect and large taxes but we must pay attention to it," he said.

“And the fourth direction is development of the service sector and small and medium businesses. Here we must give a new impetus to the development ... simplify procedures, provide supplementary funding mechanisms from the budget, from second-tier banks, and from international financial institutions for co-financing. This work is underway now. The main focus of the fourth direction is creating new jobs,” he concluded.

In addition to these, Massimov said that the government was preparing “some initiatives related to allocation of reserves from the National Fund totaling one trillion [$5.45 billion] for infrastructure development and creation of new industries in the manufacturing sector”. He pointed out that the priority areas had been identifies and that it was up to the Head of State to approve the changes to the budget.
 
By Dinara Urazova