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Russia-Kazakhstan trade affected by Russian economic slowdown 29 ноября 2014, 14:57

Experts say stagnation in the Russian economy has had its effect on the Kazakh-Russian trade turnover.
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Photo courtesy of m-astana.kz Photo courtesy of m-astana.kz

The economic situation in Kazakhstan has been affected by the negative dynamics in the Russian economy. Russia is not only Kazakhstan’s geographic neighbor but also its largest trade partner and a fellow member of the Eurasian Economic Union that comes into force next year.

Since the beginning of the year, oil prices have fallen by a quarter, the dollar against the ruble rose by 40 percent. At the same time, inflation in Russia, according to official figures, by the end of the year will exceed eight percent. Many Russian observers forecast zero GDP growth or even below that.

The Kazakh government had to revise the budget for the year 2015 and the National Bank has to keep an eye on the rate of the national currency - the tenge. Still, some things cannot be undone.

Trade turnover between Russia and Kazakhstan will most likely stagnate in the next two years, founder of Maguta Fund assets management company Platon Maguta said.

According to the expert, increasing exports of Kazakhstan goods to Russia will be hard given the devaluation of the ruble. But he added that recession in the Russian economy was not very probable.

"Growth, albeit modest, in the range of 1-1.5 percent, will still be there. And in the long term, 5-10 years, we can certainly expect an increase in trade between Russia and Kazakhstan as the Russian Federation comes out of stagnation," the expert said.

Sholpan Sapargali, analyst at Kazakhstan Center for Public-Private Partnership, added another factor to the improbability of increasing exports of Kazakhstani goods to Russia - low competitiveness of domestic products in terms of prices. Moreover, Russia introduced a list of limited imports – meats, fruits, vegetables, cheeses and dairy products – which were Kazakhstan’s strong points.

But Kazakhstan might find its way around the problem by reimporting some goods banned from direct import into Russia: adding deep level of processing or repackaging should help, Sapargali said.

Analyst of Finam Management Maxim Kliagin also believes that Kazakhstan can benefit from sanctions by supplying food products banned from being imported by the EU and the United States.

"Restrictions on food imports from the EU and the United States create a considerable potential for expansion of deliveries to Russia from Kazakhstan,” he said.

But there is a downside. “Lack of economic growth in Russia, the ongoing devaluation of the ruble, reduced incomes along with the relatively high inflation rate have a significant negative impact on the purchasing power and demand that, of course, significantly inhibit the dynamics of the retail trade," he said.

Reporting by Azhar Ashirova, writing by Dinara Urazova

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