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The COVID-19 Shock to Kazakhstan’s Economy Largest in Two Decades

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For the first time since the late 1990s Kazakhstan’s economy is expected to contract by projected 3 percent in 2020 with a moderate recovery by 2.5 percent in 2021, according to the World Bank’s latest Kazakhstan Economic Update (Summer 2020) – Navigating the Crisis report.

Although Kazakhstan’s GDP showed mild growth at 2.3 percent in the first quarter, economic activities weakened in the following months as commodity prices dropped, trade declined, and COVID-19 preventive measures slowed economic activity. Consumer demand showed moderate growth at  at 1.2 percent,  reflecting growing concerns over COVID-19 and the restriction measures. Investment is expected to ease to 1.0 percent annually, supported mostly by the on-going foreign direct investments into the oil and gas industry and residential construction. Supply disruptions and currency depreciation pushed up inflation to above the upper bound of the National Bank target range.

“The authorities acted early to contain the COVID-19 pandemic, and the accumulated fiscal buffers allow the government to introduce a relief package to mitigate the impacts of COVID-19 on the economy,” said Sjamsu Rahardja, Senior Country Economist, World Bank in Kazakhstan. “Weak demand and oil prices, as well as the protacted pandemic expose significant risks to the economic outlook. Authorities may want to consider using the available resources to provide relief to the poor and vulnerable, protect productive assets, and introduce reforms to sustain economic recovery.”

A prolonged crisis is likely to increase poverty and can increase inequality in Kazakhstan. Preliminary estimates suggest that poverty rate may rise in 2020 from a projected 8.3 to 12.7 percent – equating to more than 800 thousand additional people living in poverty. The shock to the labor market in Kazakhstan due to both the pandemic and the mitigation measures, is expected to have severe implications for jobs, particularly in sectors that employ low-skilled workers.

The report also argues that COVID-19 has a negative impact on human capital development in Kazakhstan. Unequal access to quality education, especially during lockdown, can negatively impact human capital development for the poor. School closures could result in learning loss of more than one-third of a school year and the impact could mean a decline in the Program for International Student Assessement (PISA) points. As most students in the country currently perform around the threshold for functional literacy and assuming some will lose more than others, the estimates suggest that the percentage of students performing below functional literacy will increase by 3 percentage points (from 64 to 67 percent).

“The impact of COVID-19 on education and learning losses will have a decades-long impact on the economy by an estimated 2.9 percent, amounting to an overall economic loss of up to $1.9 billion every year”, says Jean-Francois Marteau, World Bank Country Manager for Kazakhstan.  “A focus on improving access to quality education, including distance learning, would be important to prevent a decline in the quality of human capital, especially among Kazakhstan’s low-income population.”

The report concludes that under the risk of a prolonged slump in the global oil market, Kazakhstan’s pathway for a resilient recovery may focus on strengthening the effectiveness of public administration and services, including the use of e-platforms to deliver key public services, better tax administration, and a mechanism to review and redeploy fiscal resources toward better state programs. A renewed emphasis on reforms in the logistics, digital telecommunications, and financial sectors could help the overall private sector explore new opportunities.

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Sarah Frier wins the Financial Times and McKinsey & Company Business Book of the Year Award 2020

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Stephen Boyle wins the Bracken Bower Prize 2020

The Financial Times and McKinsey & Company today announce that Sarah Frier is the winner of the 2020 Business Book of the Year Award for No Filter: The Inside Story of How Instagram Transformed Business, Celebrity and Our Culture, published by UK Random House Business in the UK, and Simon & Schuster in the US.

The Award recognises a work which provides the ‘most compelling and enjoyable insight into modern business issues’. It was awarded today to Sarah Frier at a virtual event, co-hosted by Roula Khalaf, Editor of the Financial Times and chair of the panel of judges, and Kevin Sneader, Global Managing Partner, McKinsey & Company. The keynote speaker at the event was Laxman Narasimhan, Chief Executive of Reckitt Benckiser.

No Filter saw off strong competition from a shortlist of titles with a focus on subjects ranging from the future of work, corporate culture, technology and the US economy, to win the £30,000 prize. Each of the five runners-up will receive £10,000.

Roula Khalaf, Editor, Financial Times said, “No Filter is a topical and well-reported account of the rise of Instagram and its takeover by Facebook. But it also tackles two vital issues of our age: how Big Tech treats smaller rivals and how social media companies are shaping the lives of a new generation.” 

Kevin Sneader, Global Managing Partner, McKinsey & Company, said: “Sarah Frier has written a compelling saga about how this start-up phenomenon deeply embedded itself into the global cultural Zeitgeist of this digital era, in just one decade after its creation.”

The distinguished judging panel for the 2020 Financial Times and McKinsey Business Book of the Year Award, chaired by Roula Khalaf, comprised:

  • Mitchell Baker, Chief Executive Officer, Mozilla Corporation; Chairwoman, Mozilla Foundation
     
  • Mohamed El-Erian, President of Queens’ College, Cambridge, and Chief Economic Advisor, Allianz (BBYA Winner, 2008, When Markets Collide)
     
  • Herminia Ibarra,  Charles Handy Professor of Organisational Behaviour, London Business School
     
  • Randall Kroszner, Professor of Economics and Deputy Dean for Executive Programs, University of Chicago Booth School of Business
     
  • Dambisa Moyo, Global Economist and Author, Non-Executive Director, 3M Company,  Chevron & Conde Nast
     
  • Raju Narisetti, Global Publishing Director, McKinsey & Company
     
  • Shriti Vadera, Chair-elect of Prudential


The Financial Times and McKinsey & Company also announced Stephen Boyle as the winner of the 2020 Bracken Bower Prize. The Prize is designed to encourage young authors to tackle emerging business themes in a proposal for a book that is not yet published. Its aim is to unearth new talent and encourage writers to research ideas that could fill future business books of the year.

Stephen Boyle was awarded £15,000 for his book proposal, New Money, about how central bank digital currencies could transform the economy – and why you might not want them to.
 

The distinguished judging panel for the Bracken Bower Prize comprised:

  • Lorella Belli, Founder and Director, Lorella Belli Literary Agency Limited
     
  • Isabel Fernandez-Mateo, Adecco Professor of Strategy and Entrepreneurship, London Business School
     
  • Jorma Ollila, former Chairman, Royal Dutch Shell and Nokia
     
  • Saadia Zahidi, Managing Director and Head of the Centre for the New Economy and Society, World Economic Forum. (BBP Winner, 2014, Fifty Million Rising)

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Sri Lanka Can Build Back Better from COVID-19 and Realize Inclusive Growth

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The World Bank’s new Country Director for Maldives, Nepal and Sri Lanka, Faris Hadad-Zervos, completed his first visit to Sri Lanka today. The purpose of this visit was to meet key policymakers and understand the country’s development priorities. Based in Kathmandu, Nepal, this was the Country Director’s first visit to Sri Lanka in his new role. Hadad-Zervos was joined by Chiyo Kanda, the new Country Manager for Maldives and Sri Lanka, based in Colombo.

“We appreciate the frank and productive conversations we had with government officials, members of the private sector and civil society and all those whom we met during our visits in Colombo and the Provinces. These gave us a growing understanding of the Sri Lankan sustainable development storyline and aspirations,” said Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka. “The World Bank is a long-term partner for the people of Sri Lanka and is committed to help the country reach its full potential for the benefit of all its people.”

The new World Bank management team paid courtesy calls to His Excellency the President Gotabaya Rajapaksa, Hon. Prime Minister Mahinda Rajapaksa, Cabinet and State Ministers, Governor of the Central Bank of Sri Lanka, and Secretaries and senior officials associated with the current World Bank program in Sri Lanka.

They also met with members of civil society from across the spectrum, private sector representatives, development partners as well as thought leaders to better understand Sri Lanka’s vast potential for sustainable growth.

The visits included the port and other facilities in the Hambantota district to observe infrastructure development in the south. At the government hospital-Halthota in Kalutara district, they learned about the government effort to improve primary health care, integrating screening and management of non-communicable diseases, and strengthen promotive and outreach services.    

 “The World Bank is mindful of the challenges the country is facing in this COVID19 era but will also keep our eye on the opportunities for sustainable recovery. We will leverage our knowledge, technical and financial resources to support Sri Lanka to build back better in the post-COVID era for inclusive and resilient growth,” said Chiyo Kanda, World Bank Country Manager for Maldives and Sri Lanka “We are in the process of updating our Systematic Country Diagnostic to deepen our understanding and inform our next Country Partnership Framework that will define the World Bank Group’s engagements with Sri Lanka for the next 4-5 years.”  

The Systematic Country Diagnostic is a thorough analysis, informed by consultations with a broad range of stakeholders, of the key challenges and opportunities in reducing poverty and boosting shared prosperity in a sustainable manner.

In response to the COVID pandemic, the World Bank leveraged the existing portfolio and repurposed a significant portion to support the Government’s effort to reduce the impact of the pandemic. Providing urgently needed personal protective equipment (PPE), supporting vulnerable groups with temporary cash support, improving COVID-19 protection measures on public transport, facilitating tele-education for school children, and providing digital solutions to improve delivery of public services are among the emergency response activities already completed or ongoing. Discussions are under way to further adjust the program to adapt to government’s priorities and emerging development needs.

The current World Bank portfolio in Sri Lanka consists of 19 ongoing projects, with a total commitment value of US$3.65 billion in a variety of sectors including transport, urban, agriculture, water, education and health.

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ADB $300 Million Loan to Promote Macroeconomic Stability in Pakistan

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The Asian Development Bank (ADB) has approved a $300 million policy-based loan to help promote macroeconomic stability in Pakistan by facilitating improved trade competitiveness and export diversification.

“While COVID-19 hit Pakistan at a critical point in its macroeconomic recovery, the government’s ongoing efforts to ensure stability have started showing encouraging results this fiscal year,” said ADB Principal Public Management Specialist Hiranya Mukhopadhyay. “ADB’s program will support these efforts and help Pakistan to improve its export competitiveness—now more important than ever given the impacts of the pandemic.”

ADB’s program will help Pakistan recover its current account deficit in a sustained manner and continue to facilitate export diversification. It will introduce important tariff- and tax-related policy reforms to help improve Pakistan’s international competitiveness and further strengthen key institutions, including accreditation bodies, the Export–Import Bank of Pakistan, and the Pakistan Single Window.

The new financing falls under Subprogram 2 of the Trade and Competitiveness Program. Under the first phase, ADB helped the government usher in key reforms, including reducing or abolishing tariffs and ad hoc duties on a large number of raw materials and intermediate goods. Several steps were also taken to introduce e-commerce, strengthen key institutions involved in facilitating trade, and enhance the export certification process.

Since fiscal year 2004, Pakistan has registered a rise-and-fall pattern of export growth reflecting underperformance in its export industry and long-term decline in export competitiveness. This is compounded by lost export growth momentum from COVID-19, which has reduced high-income countries’ demand for manufacturing goods and disrupted the supply of raw materials.   

ADB is coordinating its efforts with other development partners and donors while the program complements International Monetary Fund-led reform initiatives by helping to improve competitiveness, which will help build robust foreign exchange reserves.

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