A deterioration in the euro-zone sovereign debt crisis combined with slowing growth in China could generate more serious headwinds for Kazakhstan’s economy, though the country is prepared to deal with any adverse effects, the country’s minister of economic integration affairs said Wednesday.
Kazakhstan’s central Asian location places it at a key intersection among China, Russia and Europe.The European Union is a major trading partner and top export destination for the oil-rich country, said Zhanar Aitzhanova, economic integration affairs minister, in an interview with Dow Jones Newswires. Meanwhile, China consumes much of Kazakhstan’s raw materials and mineral resources, making the world’s second largest economy a key engine for Kazakhstan’s growth.
As Europe’s debt crisis escalates and pressure increases on the region’s policymakers to develop stopgap measures for contagion risks, Kazakhstan is looking at growth in China as another key risk.
“We earn our hard currency in European markets, and of course this is going to have an effect. But I think that this is going to have more adverse efforts if China’s growth will slow down,” Aitzhanova said. Any “combination of these two factors will very much be influencing our economic growth.”
Kazakhstan’s gross domestic product grew 7% in 2010, according to the country’s national bank.
“Globalization went so far that nobody could say now that if there’s turmoil [or] instability in the European Union member states or in the United States that we are protected,” she said.
Still, the country is better prepared to deal with any negative spillover from Europe and further financial crisis, she said. Kazakhstan’s international foreign exchange reserves and its “safety pillar” national oil fund together total about $75 billion, equalling about 50% of its gross domestic product in absolute terms, she added.
In addition, Kazakhstan’s larger internal market could also help offset a decrease in external demand. Kazakhstan participates in a customs union with Russia and Belarus, which expands its consumer base from the country’s 16.5 million people to a combined market of 170 million consumers, the minister added.