Famous finance experts and banking sector representatives discussed the main risks of the Kazakhstani economy during the CFO Summit Idea Exchange and Networking Event 2020.
As many event participants noted, tough fiscal policy significantly reduced risks that were troublesome in 2008. The total amount of banking deposits, for instance, rose to 18.6 trillion tenge ($48.9 billion) by the end of January.
“All system risks that dominated in the finance industry were neutralized. However, aggressive fiscal policy can lead to new market bubbles. This is an anomaly. At the moment, budget finance is used to support the national economy, to resolve social problems and to get political capital. These are the reasons National Bank has to seize some stock of money,” Eldar Abdrazakov, chairman of the Kazakhstan Growth Forum, said at the opening ceremony of the CFO Summit.
Through tough control on the stock of money, the regulator tries to put a bridle on inflation.
“We have high interest rates, which means there are no obvious business-models which can secure loans and payments by local borrowers,” he added.
The volume of loans is about 13.6 trillion tenge ($35.8 billion) which is 1.4% less comparing to the start of the year. The number of business loans declined by 3.3% to 6.9 trillion tenge ($18 billion). In contrast, the volume of individual loans rose 0.7% to 6.7 trillion tenge ($17.6 billion).
“Money supply is shrinking and the only source of growth is customer crediting. Moreover, profits from exports are not diversified and too cyclic. Often production companies are financed by the national fund’s money. I really think that if nothing changes, it will disappear in 7 to 10 years,” says Anuar Ushbaev, CEO of Tengri Capital.
According to Galim Husainov, head of BankCenterCredit, one of the biggest banks in the country, when the government tries to support some industries, it has a negative impact on companies and implies many risks.
“If the government supports one business but ignores others, it can lead to disproportions,” he said. “Some companies work in a real business environment but others get benefits for free. The government can’t and shouldn’t nominate specific companies as leaders.”
The balance of payments was already influenced by this situation. As National Bank’s press release states, last year’s balance of payments had a deficit of $5.5 billion compared to $288.9 million in the year prior. This negative balance can be influenced by low commodity prices, experts say. However, countries that actively use innovative technologies are able to avoid downsides.
“There are no successfully diversified resource-based economies in the world. The only way to do that is by embracing innovations and technologies in the production process. These two models should be developing together,” said Ekaterina Trofimova, partner of Deloitte in NIS.