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1.0 Introduction The whole world is experiencing a serious crisis, crisis from financial became economic. In each country, to overcome this crisis, mobilizing internal resources, because collective action within the EU, "twenty" and other international organizations and associations of tangible results was not given. Kazakhstan confronts the crisis for more than three years. The fall of 2007 was drafted and adopted an action plan aimed at ensuring stability and economic development of the country. Ultimately, for completion of "business" construction, food security, agriculture development, supporting small and medium-sized businesses has been allocated $US4.6 billion. In 2008, on implementation plan of stabilization actions that was approved by the head of Kazakhstan, allocated $US10 billion. The aim of plan is mitigation of the negative impact of global crisis on the socio-economic situation in Kazakhstan and providing necessary foundation for future growth. Overall government injection in Kazakhstan's economy to nowadays reached more than $US20 billion (Sultanov, et al., 2009). The aim of this paper is analysis of Kazakhstan economy before crisis, during crisis and after strong crisis bites during the recovery which is still continues. A brief overview of the country was given as an introduction for this paper. After that the first important part is about impact of financial crisis on financial sector, mining, oil and gas sectors of Kazakhstan; as well as, civil construction because of mortgage, industrial growth because of low price on natural resource, inflation, and so on. The second part shows policies that have been used by government to overcome crisis, and in case of Kazakhstan not just overcome but to establish foundation for future rapid growth. According to president of Kazakhstan Nursulan Nazarbayev - Crisis is an opportunity for us to review our mistakes, gaps and weaknesses, and create a new adjusted development strategy of a sovereign state (Official site of the President of the Republic of Kazakhstan, 2010). The next part is about impact of those policies on Kazakh economy, and also outlook that was given by experts of national Bank of Kazakhstan, Citibank, and Minister of Economic Development of state. 2.0 Country background Kazakhstan, a former republic of the Soviet Union located in western Asia, has a total land area of 2.7 million square kilometers, slightly less than 7% of the total landmass of the former Soviet Union. Russia borders Kazakhstan to the north; Mongolia and China to the east; Kyrgyzstan, Uzbekistan, and Turkmenistan to the south; and the Caspian Sea to the west.

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Large-scale emigration of ethnic Russians, Germans, and Ukrainians accounts for most of the population: Kazakh 55.8%, Russian 28.3%, Ukrainian 3.3%, Uzbek 2.6%, German 1.8%, Uyghur 1.5%, other 5.0% (U.S. Department of State, 2009). Although there are mountainous regions in the south and southeast, plains comprise about 86% of the total land area. Only 15% of the land is arable, and the main agricultural activity in both the plains and lower mountainous areas is raising livestock. Kazakhstan has abundant deposits of petroleum, coal, iron ore, manganese, nickel, cobalt, copper, molybdenum, lead, zinc, bauxite, gold, and uranium. The country extends 1,600 kilometers from north to south, and the climate varies considerably over this distance, from moderate temperatures in the steppe region of western Siberia to a warm Mediterranean climate in the south (Kazakhstan Country Report, 2009). Following buoyant economic expansion by over 10% annually in the period from 2000 to 2007 annual GDP increase decelerated to 3.3% in 2008 and further to 1.2% in 2009. The impressively strong growth until 2007 benefited from economic recovery after a particularly deep transition depression in 1990s (Figure-1), substantial energy price rises and related terms-of-trade improvements and large inflow of capital FDI as well as debt-creating inflows. Figure-1

\
Source: IHS Global Insight Report: Kazakhstan, 2010.

At the same time, the deterioration of the current account balance despite high oil prices signaled economic overheating. Gross external debt swelled to levels of above 90% of GDP in 2006 and 2007, with banks' external debt growing fastest (Table-1) (FINANCIAL STABILITY REPORT, 2010). GDP (PPP) in 2009: $181.9 billion; per capita: $11,800. Labour force: 8.7 million; unemployment rate: 6.3%; population below poverty line: 12.1%

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(2008); budget: revenues: $18.98 billion, expenditures: $22.44 billion (Central Intelligence Agency, 2010). Table-1

Source: FINANCIAL STABILITY REPORT, 2010

In the period of high oil prices, gross official reserves also increased and the authorities accumulated substantial financial resources in the National Fund of the Republic of Kazakhstan, the country's oil stabilization fund (FINANCIAL STABILITY REPORT, 2010).

3.0 Economic structure 3.1 Monetary systems National currency tenge's exchange rate determined with limited intervention of the National Bank of Kazakhstan (NBK) on the basis of supply and demand in the foreign-exchange market. The NBK announces tenge's exchange rate based on exchange trading sessions that determined only once a week. They used for the customs valuation, the accounting of banking transactions, and tax payments. Usually exchange rate against USD is set on the basis of an assessment of the general macroeconomic situation, transactions in the foreign exchange market, inflation rate and monetary aggregate indicators, credits and NBK notes, the short-term rates on deposits, and repo rates. The currency market consist of a network of exchange bureaus handling foreign exchange cash transactions, and the KASE, which conducts daily trading in online mode using an electronic trading system, an over-the-counter interbank market. There are controls on capital transactions (IHS Global Insight Report: Kazakhstan, 2010).

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3.2 Financial systems Financial system in Kazakhstan less damaged than other Central Asian countries by Russia's financial crisis in 1998. Kazakh banking assets have surged in recent years, while the 230 banks that existed in 1993 have consolidated to 34. The three largest hold 60% of the country's banking assets. The financial sector is still small compared with the size of the economy, but private deposits and lending are growing, as financial deepening progresses. From 1998 the government introduced a pay-as-you-go funded pension system, which is formed by mandatory salary contributions of 10%. Currently more than 70% of the workforce contributes to pension funds, which have accumulated US$12 billion. First foreign treasury bills were traded in 2003, and trade in foreign corporate bonds was launched in 2006. Meanwhile, equity trading on the electronic stock exchange has been slow to pick up (IHS Global Insight Report: Kazakhstan, 2010). 3.3 Key sectors Kazakhstan has a wealth of mineral resources, with major deposits of petroleum, natural gas, coal, iron ore, manganese, chrome ore, nickel, cobalt, copper, molybdenum, lead, zinc, bauxite, gold, and uranium. Kazakh iron ore is of high quality and is generally easy to mine. The country is also among the world's largest exporters of copper, In addition, there is production refined gold (U.S. Department of State, 2009). Oil and Gas: After collapse of the former Soviet Union and decline of industry, the oil industry has recovered. That contributed to attract investment-led oil boom. Nowadays, petroleum industry accounts for over half of industrial output. Biggest Kazakhstan's oilfields, such as Kashagan and Tengiz have recoverable reserves around 7-9 billion and respectively 6-9 billion barrels. The government plans to boost yearly oil production to 120-150 million tons by 2015. Metals: Metallurgical industry is another sector that has recovered from the wreckage of the Soviet Union. Semi-processing of metals and steel production are particularly successful. Kazakhstan has a 6% of global reserves of iron ore and ranked eighth largest producer in the world of steel. Also country ranks among the world's largest exporters of copper, gold and silver. Agriculture: The sizeable proportion of the country's domestic economy still accounts for agriculture. Kazakhstan had an important role in the Soviet economy for wheat production.

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But after of USSR collapsed this sector badly hurt. It was difficult time and recovery process was very slow. The legislation on the privatization that passed in 2004 should help development of the sector (IHS Global Insight Report: Kazakhstan, 2010). 3.4 Trade profile Kazakhstan's value of exports to countries outside the CIS has grown much faster than CIS exports. In 2005, Switzerland and Italy drove past Russia to claim the position of Kazakhstan's most important export destination. Additionally, France and China are important export markets (Table-2). Trade with the booming Chinese market in particular is likely to grow substantially further. Also, Russia with Kazakhstan has also signed the Single Economic Area agreement, therefore still remains by far the most important import supplier (IHS Global Insight Report: Kazakhstan, 2010). Table-2

Source: IHS Global Insight Report: Kazakhstan, 2010.

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4.0 Crisis and impact of the crisis. As the crisis is global in nature, Kazakhstan, as part of the world economy, is also involved in its orbit. Despite the high growth of national economy in recent years, the decline observed in 2007-2008 in construction and finance sectors, was weighty enough. This gradually merged it with a very painful crisis of liquidity in global financial markets, as well as phenomena such as reduced demand for commodities, slump in prices, reducing employment, etc. In general, there is a significant economic slowdown. If during the period from 2000 to 2006 the average annual rate of GDP reached the highest rate - 10.2%, while in 2007 GDP increased by 8,9% and 3,2% in 2008. Average annual inflation was 17%. The crisis caught banks off guard, which was manifested in the deterioration of the banking system. Profits of banks, resulting in 9 months of 2008, compared to the same period last year, decreased by 2.5 times. Increased share of problem loans and arrears. Most of all debts owed to banks, builders 52.1 billion tenge (2007 - 7.8 billion), food industry - 6.2 billion, metallurgy 3.9 billion, agriculture - 4 billion (Sultanov et al., 2009). According to the First Credit Bureau (FCB) in the credit system of Kazakhstan are involved 42% of the economically active population (3455 thousand people). In the area of corporate lending, only 10% of firms have a credit history. At the conclusion of FCB in the Republic, there is no credit crisis, it is observed in the field of refinancing. According to the FCB, on average, a single legal entity accounts for about 14 credits. There are firms with up to 600 credits. According to the government of Astana, crisis led to a reduction in volume of construction works on 12,9%, investments - by 27,4%, employment - 23%. At the same time new housing from all sources amounted to 107.3% over the same period in 2007, suffered damage of individual housing market, a decrease of 44,2% (Sultanov et al., 2009). Serious problem for the country was a sharp decline in prices and demand for commodities oil, metals, and ore. In 2007, exports of mineral products has provided about 70% of external revenue ($33.3 billion from $47.7 billion), in turn, decline in demand for raw materials leads to a reduction in production and, hence, employment. In the mining industry employed more than 193 thousand people. The annual income of the industry is 105.2 billion tenge (Sultanov et al., 2009).

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4.1 Recent developments Economic growth and GDP The slowest growth in eight years was seen in 2007. Coming in below 9.0% for the first time since 1999, the annual growth rate of 8.9% finally marked some slowdown in the oil-fueled expansion (Table-1 above). The construction boom cools and the credit crunch became stronger. The construction sector largely financed its recent boom with bank credits and consequently, it is the hardest hit by the weaker availability of credit. For instance, the expansion rate of the construction sector eased to 16.4% in 2007, which is deceleration from 2006 growth is 27.0% and the first-half expansion rate of 36.8% year-on-year (y/y). Industrial growth slowed from around 7.0% in 2006 to 4.5% in 2007. But output in the agricultural sector increased 8.4% in 2007 after rising 7.0% in 2006. It is likely that the industrial and construction sectors also pulled growth rates in the fields of transportation, communication, and financial intermediation into respectable levels (IHS Global Insight Report: Kazakhstan, 2010). In 2008 growth slows markedly. According to the State Statistics Agency, the country's GDP increased 3.2% over the whole of 2008 (Table-3). While testifying to a marked slowdown, the latest growth figures also confirm the economy's reliance on its industrial sector. Indeed, even if only expanding by a relatively modest rate of 2.2% over the whole of 2008, the share of the industrial sector of the total GDP increased to 31.6% from 28.3% in 2007. Specifically, output in the mining and quarrying sector rose 5.3%, its GDP share clearly topping 18% after an increase of more than 3 percentage points from its weight in 2007. Conversely, manufacturing output retreated 2.6% from the previous year, while production and distribution of electricity, gas, and water expanded 6.4% over the year. Because of construction sector growth declined due to crisis, consequently, the GDP share of the construction field dropped to 5.6% in 2008 from more than 8.0% in 2007. Further, official annual GDP data show that output in the agricultural sector contracted 5.6% in 2008. Most service fields still managed positive growth rates, while financial-intermediation activity contracted 0.5% from 2007 (IHS Global Insight Report: Kazakhstan, 2010).

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Table-3 Country GDP growth

The Kazakh economy's current challenges are clearly reflected in industrial performance as well. Annual industrial growth around 10% was the norm for several years earlier in this decade, but national accounts data for 2007 showed the sector expanding by a relatively weak rate of 4.5%. For example, the industrial sector is negatively affected via lower demand for building materials. In addition, the overall cooling in global growth marks easing external demand (IHS Global Insight Report: Kazakhstan, 2010). According to the latest reported official estimates, the economy shrank 2.2% y/y over JanuarySeptember of 2009. This result compares with growth of 3.9% y/y seen in the same period a year earlier, while marking marginal easing in the pace of contraction with a revised fall of 2.4% y/y. In particular, the construction sector suffered an 8.9% contraction in annual comparison over the first three quarters of the year, while supply of financial services fell 5.7% y/y. At the same time, the important industrial sector contracted 0.4% y/y overall. Conversely, agricultural output managed a growth rate of 1.7% y/y for JanuarySeptember (IHS Global Insight Report: Kazakhstan, 2010). Consumer demand In 2008 retail sales grew. Success of the oil-producing sector has led to strong private demand, despite consumption growth being coupled with unequal wealth and income distribution. Supported by real income gains, retail sales grew at annual average rates of some 1920% over 200507. Peaking at over 40% in AugustSeptember, retail sales growth averaged 34% in 2008. In the beginning of the decade, household income grew some 1 percentage point slower than GDP, but the roles then reversed. In 2006, real wages rose 10.2% on the average. Over 2007, nominal wages increased 25% year-on-year, whereas real wage growth slowed down to 5.2% in 2007 (IHS Global Insight Report: Kazakhstan, 2010).

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Capital investment Declining of investment growth was seen already in 2008. The dramatic fall in construction activity over 2008 was reflected in an annual decline of 5% in the sector's investment. Also, investments in the industrial sector plummeted around 9%. Relatively rapid growth in investment in some service sectors, notably in the fields of real estate as well as transport and communication, lifted the overall investment growth for 2008 to 4.6%. Investment growth had moderated in 200607 after the 2005 surge, but remained strong. In addition to pipeline construction, the investment boom was largely attributed to a wide range of construction projects in the rising new capital, Astana. According to State Statistics Agency, 2006 growth of fixed investment at 10.6%, bringing the value of total annual investment to some 2.8 trillion tenge. Annual investment expansion for 2007 came in at 8.2%. Construction investments surged 37.1% over 2007 (IHS Global Insight Report: Kazakhstan, 2010). In 2008 FDI inflows was US$19.8 billion, which is 7% more than in 2007. The mining and quarrying sector received around 16% of the total, while geological exploration and prospecting activities received a share of 38%. The 35% y/y decline in FDI inflows in the fourth quarter followed growth rates of 48% y/y and 32% y/y in the third and second quarters, respectively. Prior to this, growth of FDI inflows had accelerated to 74% in 2007 from 61% in 2006. Inflows of FDI fall 20% during 2009. FDI inflows decreased some 24% y/y in the first quarter of 2009, totaling US$3.3 billion for the period (IHS Global Insight Report: Kazakhstan, 2010). Labor markets Economic boom in Kazakhstan ignited labor demand and contributed decreasing unemployment. For instance, unemployment rate fell from 8.1% in 2005 to 7.8% in 2006 and further to 7.3% in 2007. Despite that the oil industry only employs a small portion of the workforce; the energy boom also supported employment in the construction sector, and in several service sectors such as transportation and financial services. According to the Kazakh State Statistics Office average unemployment had kept falling further in 2008, but quarterly rates had started to rise. The jobless rate rose to 6.6% in the fourth quarter from 6.4% in the third quarter, bringing the average unemployment rate for 2008 to 6.6% (IHS Global Insight Report: Kazakhstan, 2010).

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Inflation Annual consumer price inflation ended 2008 at 9.5%. After persistently remaining around the 20.0% mark during JuneAugust, inflation had eased to a still very high rate of 18.2% y/y in September, but then moderated more substantially to 13.9% y/y in October and further to 11.3% y/y in November. December developments in consumer prices brought the annual average inflation rate for 2008 to 17.0% (Table-4). With a surge of 23.4%, food price gains led inflation in 2008 (IHS Global Insight Report: Kazakhstan, 2010). Table-4

Source: IHS Global Insight Report: Kazakhstan, 2010.

Exchange rates The tenge appreciated rapidly during 200607 and more moderately in 2008, on the back of strongly rising oil revenue inflows. Real appreciation of the tenge against the U.S. dollar has been among the highest rates in the region; however, periods of tenge weakening also have been observed. These periods were attributed to the new regulations implemented in 2006 regarding transfers of oil tax revenue to the National Fund, which boosted demand for U.S. dollars, and then again in the summer of 2007 amid concerns over the international financial turmoil (Table-5 and Figure-2) (IHS Global Insight Report: Kazakhstan, 2010). Table-5

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Figure-2

Source: IHS Global Insight Report: Kazakhstan, 2010.

External sector In 2008 was achieved a strong current-account surplus, which is due to new capacity and the strength of oil prices that boosted exports. It corresponds 5.3% of GDP, or US$7 billion of surplus. The financial crisis takes its toll on external reserves as well. Reserves fall over the first half of 2009. Gross international reserves at the National Bank of Kazakhstan totaled US$18.6 billion at the end of June, having decreased 6.4% since the beginning of the year. At the same time, assets in the National Oil Fund in the second quarter of 2009 increased up to US$23.6 billion, a cumulative decrease of 14% since the beginning of the year. Reserve growth had already stalled toward the end of 2008, as foreign currency is used for exchangerate defense and banking-sector support. Reserves ended 2008 at US$19.9 billion, up13% during the year. Meanwhile, the National Fund had gained 31% during the whole of the year, reaching US$27.5 billion. Gross foreign-currency reserves ended 2009 at US$23.2 billion, up16.8% annually. In the interim, the National Oil Fund stood at US$24.4 billion in December 2009, or 11.3% lower than a year before. This fall over the year marks a major turnaround after 2008, when the oil fund had swelled by 30.8%. Kazakhstan's external reserve growth was directly affected by developments in oil prices. These started to recover from the second quarter, and after falling in quarter-to-quarter terms for the previous three quarters, Kazakhstan's gross external reserves increased some 11% in JulySeptember and by over 12% in OctoberDecember (IHS Global Insight Report: Kazakhstan, 2010).

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5.0 Policies used by government 5.1 Monetary policy There is a still financial risk because banking sector restructuring is not finished. World financial crisis led to difficulties for the heavily externally indebted Kazakh banks to refinance their debts, which led to restructuring. In addition, asset quality has deteriorated amid the economic contraction. The National Bank of Kazakhstan (NBK) set up a US$4billion banking sector stabilization fund, as well as a US$6-billion distressed asset fund for buying up nonperforming loans from banks. The government has since indicated that it is not willing to provide further support for banks. In an important development, creditors of The Alliance Bank, which was nationalized in July, in December approved a restructuring of the bank's 677-billion-tenge (US$4.5-billion) debt, and should bring the bank's debt to about 150 billion tenge. The agreement paves the way for the Samruk-Kazyna National Welfare Fund to take a 67% shareholding in the bank, which it will eventually dispose of to private-sector investors. Meanwhile, Kazakhstan's largest bank, BTA Bank, under government control since February 2009, has signed an agreement to restructure at least US$12 billion of debt. Creditors will obtain a 15% stake in BTA Bank, which recently asked borrowers to repay loans ahead of schedule to strengthen its position in the rescheduling process. The debtrestructuring plan was in October approved by the Kazakh courts and the financial regulator; new legislation has reduced the ability of creditors to block restructuring agreements. Temir Bank, the consumer lending subsidiary of the BTA Bank, has defaulted on its debt and is seeking restructuring (IHS Global Insight Report: Kazakhstan, 2010). Because of rapid banking sector expansion seen last few years which is bears considerable risks, moderation in credit growth is long overdue. Before financial crisis in 2007 Kazakhstan's banks had a problem with high liquidity. In order to absorb excess liquidity from the interbank market and to prevent sharp exchange fluctuations, the NBK issued shortterm notes, which, in the presence of very strong oil revenue inflows, translate to curbing tenge appreciation. The weakened external demand on oil and rapid annual decline in prices quickly and completely changed Kazakhstan's financial environment. A key issue from the point of view of financial stability as well as economic prospects remains how fast the banks can start to increase lending on the basis of the new deposits, to companies in urgent need of credit that has so far remained unavailable. Relying on domestic funding rather than external borrowing is crucially important to secure stable banking sector development going forward (IHS Global Insight Report: Kazakhstan, 2010).

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Cooling inflation increases the scope for liquidity support. The NBK has recently faced a challenging balancing act, as inflation remained rapid even as the banking sector was struggling with liquidity problems. Inflation has now started to moderate. The easing price pressure then gave the monetary authorities increasing room to maneuver in terms of liquidity support, and they have embarked on a monetary easing path, in the hope of boosting bank lending to the corporate sector. But, with deceleration of inflation now likely to moderate, the scope for further interest reductions is also diminishing, and further rate cuts are thus likely to be more moderate and less frequent. Indeed, the NBK has recently said that it expects annual inflation to remain below 7% in the first quarter of 2010, which will allow for modestly positive real interest rates to be achieved with the current level of the policy rate (Figure-3, Table-6). Figure-3, Table-6

Source: IHS Global Insight Report: Kazakhstan, 2010.

The National Bank of Kazakhstan (NBK) enacted a surprise interest-rate hike in December 2007. The 200-basis-point increase from 9% to 11% was unexpected, because in its previously published monetary policy plans, the NBK had not envisaged an interest-rate hike until 2008. The policy revision, taken to control inflation, was unforeseen particularly because the NBK had only recently revised its plans to increase interest rates in order to ease

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banks' access to financing. From the middle of 2008 to support liquidity above inflation, NBK embarks on a monetary loosening path. In July 2008 they cut the refinancing rate by 50 basis points from 11.0% to 10.5%. Also, from 29 July they stated that they will also cut banks' reserve requirements by 1 percentage point. Withal the reserve requirement for domestic loans decreased from 6% to 5% and the reserve requirement for external loans was cut from 8% to 7%. In addition, in the hope of boosting consumers' confidence in the banking system, the NBK increased capital of its Deposit Insurance Fund to 30 billion tenge from 14 billion tenge (IHS Global Insight Report: Kazakhstan, 2010). 5.2 Fiscal policy During the crisis fiscal position of country deteriorated. Kazakh state budget revenues did not reach their targets in 2008 marks a significant change for the public finances of oil-producer economy, where fiscal performance over recent years, and even well into 2008, was strongly boosted by record-breaking oil prices. With oil prices having now sharply fallen in annual comparison and economic growth set for a significant slowdown, budget prospects in 2009 have taken a significant turn for the worse. The recent strength of oil-revenue inflows had left public finances in a relatively strong position to provide support to the ailing economy amid the 2009 downturn. The government has opted to boost social spending now that the economy is contracting (IHS Global Insight Report: Kazakhstan, 2010). In the midst of a deteriorating economic outlook and tenge devaluation the budget of 2009 was revised. Fiscal plan on 2009-2011 was been based on an average price of oil an approximately US$60 for barrel for the period in three years. Unfortunately, in November those expectations changed to US$40 in 2009 and US$50 in 2010-11. Consequently, the state budget revenue target was cut to 1.9 trillion tenge (US$15.8 billion) in 2009. The 2009 budget deficit is projected at 3.4% of GDP, with revenues foreseen at 2.84 trillion tenge and spending at 3.41 trillion tenge, bringing the deficit to 573.6 billion tenge. The budget is based on a GDP growth projection of 1% in 2009 (IHS Global Insight Report: Kazakhstan, 2010). In 2008 country budget revenues was less than planned. Country budget revenues totaled 4.034 trillion tenge (US$27.4 billion), growing 40% from 2007 but remaining 0.4% below target. Value-added tax (VAT) revenues came in below target because of larger-thanexpected VAT refunds and slowed imports. A very sharp fall in advance payments from the mining sector left the intake of corporate-income tax short of projections. The budget received critical support from export duty revenues. With state budget spending amounting to

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a total of 4.373 trillion tenge, the budget deficit came in at a total of 332.2 billion tenge, or 359.5 billion tenge below the estimate. Kazakhstan has a stabilization fund that is based on tax revenues that exceed the target. The government initially projected the fund to stand at some US$32.8 billion at the end of 2008, but support needs of the financial sector and falling oil prices derailed this plan, and the fund ended the year at US$27.3 billion (IHS Global Insight Report: Kazakhstan, 2010). 6.0 Impact of the policies As we can see government tries to increase demand on local goods and services through pushing national program "Road Map", its helped keep companys profitability (Figure-4). As the result thousands of employees did not lose job that also led to keep risky mortgages from default. Therefore, Kazakhstan's economy during recession keeps positive growth. Figure-4 Increase demand

Growth in production of goods led to an increase in GDP. According to NBK, the GDP in 2009 increased by 1,2%. Production of goods increased by 2,1%, production of services has decreased - on 0,4%. Volume of GDP in nominal terms amounted to 16,100.3 billion. In relation to 2008 the GDP share of manufacturing goods declined to 44.1% and services - has increased, reaching 54.7% (Figure-5) (The National Bank of Kazakhstan, 2010).

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Figure-5

GDP, the production of goods and services, 2005-2009 GDP Service production Production of goods
110.5 109 109.6 104 99.6 2005 2006 2007 2008 2009 102.1 101.2

114 112 110 108 106 104 102 100 98 96

Source: The National Bank of Kazakhstan, March 2010

Change the value of oil, determining the pricing policy in the industry, has a significant impact on the cost parameters of production. In relation to March 2009 nominal output of extractive industries rose in March 2010 by 1,7 times, while this growth was the increase in oil prices in 1,7 times, while the physical volume of production rose by only 10.7%. The main contribution to industrial production makes production of crude oil and natural gas, whose share in March rose by 2.6 percentage points, reaching 55.5% (Figure-6). Figure-6
Relationship of production volumes and oil prices
billion tenge %,$

1100 900 700 500 300 100 I

Industry

Extractive industry

Index of oil prices

Brent $/barrel

140 120 100 80 60 40 20 0

II

III

IV

VI

VII

VIII

IX

XI

XII

II

III

2009 - 2010

Source: The National Bank of Kazakhstan, March 2010

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Most of Kazakhstan's exports shipped to EU countries, CIS and China, but in 2009 the EU's GDP declined by 4.2%, GDP of the CIS fell an average of 7%, and only in China marked by an increase of 8,7%. According to the WTO, the fall in world trade in 2009 was 12%, a record decline over the past 65 years. In these circumstances, the foreign trade turnover of Kazakhstan for 2009 declined with the CIS countries by 34%, with other countries - by 34,5%. In February 2010 compared to February 2009 foreign trade turnover grew by 24.5% (exports - by 54.4% and imports - decreased by 16,7%) of the previous month growth reached 2.9% (exports - fell by 0.5%, imports - grew by 12,8%). Because of the growth in imports net turnover in February fell to 2.6 billion U.S. dollars (Figure-7).

Figure-7
billion US$ 8 7 6 5 4 3 2 1 0 I II III IV V VI VII VIII IX X XI XII I II
2009 - 2010 .

Exports and imports, foreign trade turnover (right axis)

% 160 140 120 102.9 100 80 60 40 20 0

Export $

Balannce $

Foreign trade turnover, in % to the corresponding month of previous year

Foreign trade turnover,% to previous month

124.5

Import $

Source: The National Bank of Kazakhstan, March 2010

Under the influence of the global crisis reduced the flow of funding Kazakhstan's economy that came from external loans and earnings from exports, which reduced the money supply in the economy. Repayment of external liabilities of banks and the government support the economy accelerated the pace of M3 growth since the second half of 2008, however, with 2 quarter of 2009, due to lower bank lending activity, the growth of M3 slowed (Figure-8).

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Figure-8
The dynamics of M3 and GDP (as% of corresponding period of previous year)

% 200 175 150 125 100 75 50

M3 (left axis)
111.3

GDP annual

115 110 101.2 105 100 99.7 99.3 95 90 IV-2009

III-2006

III-2007

III-2008

IV-2006

IV-2007

IV-2008

Source: The National Bank of Kazakhstan, March 2010

By March 2009 the volume of construction works grew by 3,8%, by February 2010 - by 50,2%. March inflow of investments into housing construction, mostly because of government injection, helped increased construction works, and works on overhaul and maintenance, resulted in the growth in the industry. Growth in the March agriculture by 2,9% was due to increased livestock performance by 3,1%, while the volume index of crop production on the background of a seasonal slowdown of activity was 100%. After a year of consecutive decline, four consecutive month increasing the cargo turnover. By last year, an increase of cargo turnover amounted to 2.3%, monthly growth reached 6,1%. Profitability of enterprises in Q4 of 2009 amounted to 21,9% (in Q3 of 2009, 24.8%) (Figure-9). Despite the increase in revenues from product sales, increased costs are not allowed to provide a substantial increase in profits, resulting in slower growth and profitability led to a decline in the share of profitable enterprises.

III-2009

II-2006

II-2007

II-2008

II-2009

I-2006

I-2007

I-2008

I-2009

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Figure-9
billion tenge 4800 4000 Financial performance of enterprises 61.6 57.9 49.2
57.2 %

The share of profitable enterprises (right scale)

60

Rentability (right scale)

3200 2400 1600 800 0 I II III IV
2008 - 2009 .

45

21.9

30

1178.7

996.6

15

0 I II III IV

Profit, in biilion

Sales proceeds, in billion

Source: The National Bank of Kazakhstan, March 2010

The number of employed in the economy increased in March 2009 on 3,9%, the unemployed - fell by 11.1%. In monthly terms the number of employed in March (to February 2010) increased by 1,2%, the unemployed - fell by 0.4%, resulting in the unemployment rate fell from 6,2 to 6,1% (Figure-10). Figure-10
% 105 103 101 99 97 95 93 91 89 87 85 I II III IV V VI
2009 - 2010 .

Employment and unemployment Employed, in % of the corresponding month of previous year

% 103.9 7.2

Unemployed,% of the corresponding month of previous year Unemployment rate (right scale) 88.9

6.8

6.4

6.1 X XI XII I II III

VII

VIII

IX

Source: The National Bank of Kazakhstan, March 2010

In February, 2010 (comparing February 2009) salaries in nominal terms grew by 7.3% in real terms - fell by 0.1%. The increase from 1 January 2010 the size of social benefits contributes to growth monetary income, which rose in February by 5% (Figure-11).

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Figure-11
% 108 106 104 102 100 98 96 I II III IV V VI VII VIII IX X XI XII I II
2009 - 2010 .

Income of population Average salary per worker (right scale)

thousand of tenge 90 80 105 70 60 50 82.8 40 66.7 66.3 30 20 10 0

61.4

Real wage index, in % to the corresponding month of previous year

Real incomes,in % to the corresponding month of previous year

Source: The National Bank of Kazakhstan, March 2010

7.0 Outlook Kazakhstan authorities are forecasting economic slowdown in 2011 on 3,1% in comparison with growth this year at 5,0%. Also, have plan to double increase export duty on crude oil by the next year, to $40 per ton, in order to increase revenues going to introduce a progressive scale of tax for individuals and reduce the budget deficit 2011. This measure will increase the budget revenues at 421.4 billion tenge. "In forming macroeconomic forecasts have been taken into account the assessments of international organizations on global growth and world prices for major export commodities - oil, metals and others," - said Minister of Economic Development Zhanar Aitzhanova at a government meeting. "In the medium-term GDP growth forecast was 3,1% in 2011, 3.3% in 2012, 3.5% in 2013," she said. The implementation of industrial projects and increasing foreign demand for exports of Kazakhstan will contribute to the growth of industry in 2011 at 3,6% in 2012-2013 - at 3,9%. Inflation, as predicted by the National Bank, will be located in the corridor of 6,0-8,0% in 2011 - 2015. Budget expenditure projected at $US31.7 billion, an increase to the plan this year to 11.1 percent (AFN, 2010). According to Citibank expert for Russia and CIS Novikova Kazakh economy will grow 56%, and its a way to recovery. Also she said that have a several factors that inhibit GDP growth, mostly it is inflationary pressures and slowdown in bank lending (InterfaxKazakhstan, 2010).

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8.0 Conclusion In concluding this paper, has been found that Kazakhstan economy strong declined because of world financial crisis; and was one of the first country which faced a problems in a banking sector during 2007. Despite that Kazakhstan government rapid responded to first wave of crisis and developed a recovery policy that included monetary and fiscal interventions. Meanwhile, country collected fund during the last ten years of rapid growth which is mostly from state's extra revenues from selling oil and gas. After intervention of policies which has been used to overcome crisis and its consequences, has been shown impact of polices that deserves special attention by reason of it success. The important fact that country for providing budget with enough money used only resources that they have in National Fund, and was not borrowed on loan market. Impact of the polices has been seen from 2009 when economic grew on 1.2%, and 2010 for the first half of the year economy grew more than 6% and officials predicts growth at this year 6-7%. According to national bank in next three years Kazakhstan national economy will grow at least 3.1-3.5%.

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List of reference AFN, 31 August 2010, Kazakhstan's economy could grow in 2011 to 3,1%, viewed 7 November 2010, translated from Russian. Available at: <http://afn.by/news/i/140587> Central Intelligence Agency, 27 October 2010, Central Asia: Kazakhstan, viewed 2 November 2010. Available at: <https://www.cia.gov/library/publications/the-worldfactbook/geos/kz.html>. FINANCIAL STABILITY REPORT, 19 JUNE 2010, viewed 2 November 2010. Available at: <http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=4&hid=8&sid=36429401663a-466f-a7ce-1ac699bbbfa3%40sessionmgr10> IHS Global Insight Report: Kazakhstan, 23 June 2010, Country Intelligence, viewed 1 November 2010. Available at: <http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=6&hid=112&sid=36429401663a-466f-a7ce-1ac699bbbfa3%40sessionmgr10>. IHS Global Insight Report: Kazakhstan, 1 March 2010, Country Intelligence, viewed 1 November 2010. Available at: <http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=5&hid=17&sid=d5b27982-4d8f4dce-9aaf-ee0ac363d614%40sessionmgr14>. Interfax-Kazakhstan, 8 November 2010, KAZAKHSTAN'S ECONOMY WILL GROW BY 5%-6% IN 2011, CITIBANK, viewed 6 November 2010. Available at: <http://www.interfax.kz/?lang=eng&int_id=expert_opinions&news_id=171>. Official site of the President of the Republic of Kazakhstan, 2010, Address of the President of Kazakhstan (responses), viewed 5 November 2010, translated from Russian. Available at: <http://www.akorda.kz/ru/speeches/addresses_of_the_president_of_kazakhstan/address_of_t he_president_of_kazakhstan_responses_>. Sultanov, B.K, et al., 2009, World Economic Crisis: Implications for Kazakhstan, Proceedings of the International Round Table, Almaty. viewed 3 November 2010, translated from Russian. Available at: <http://www.kisi.kz/img/docs/4592.pdf> The World Bank, n.d., viewed 3 November. Available at: <http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG>.

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The National Bank of Kazakhstan, March 2010, Information - an analytical review of the economy of Kazakhstan, viewed 5 November 2010, translated from Russian. Available at: <http://www.nationalbank.kz/index.cfm> The PRS Group, Inc, 1 February 2009, Kazakhstan Country Report, viewed 2 November 2010. Available at: <http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=6&hid=8&sid=36429401-663a466f-a7ce-1ac699bbbfa3%40sessionmgr10>. U.S. Department of State, 20 April 2009, Background Note: Kazakhstan, Bureau of South and Central Asian Affairs, viewed 2 November 2010. Available at: <http://www.state.gov/r/pa/ei/bgn/5487.htm>