Decent GDP growth in July amid ongoing structural transformation and some unresolved issues

KAZAKHSTAN - In Brief 16 Aug 2024 by Evgeny Gavrilenkov

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The Bureau of National Statistics reported that the short-term indicator (measuring activity in six main segments of the economy) grew by 4.1% y-o-y in 7M24 (up from 3.9% y-o-y in 1H24). The services sector continued to evolve smoothly as retail sales expanded by 7.1% and 5.9% in 7M24 and July (y-o-y). Communication services grew 8.3% and 5.9% (y-o-y in 7M24 and July). Even though freight transportation was slightly down in 7M24 (by a mere 0.3% y-o-y), passenger transportation expanded by 14.3% y-o-y. Construction was up by 8.7% y-o-y. In 7M24, industry, the core constituency of the Kazakh economy, delivered 2.9% y-o-y growth (in July alone, it grew by 3.5% y-o-y). The mining segment expanded by a mere 0.5%, while the manufacturing segment was by a more impressive 5.1% (both y-o-y in 7M24). A relatively weak freight transportation numbers match a rather weak performance of the mining segment. In 7M24, investments in production capacity grew by 0.4% y-o-y only. Interestingly, investments of small companies were up by 13.7%, medium-size companies’ investments expanded by 25.5%, while big businesses decreased their investments by 19.5% (all numbers are y-o-y in 7M24). Previously, we repeatedly mentioned that lacking tax revenues to finance inflated budgetary expenditures, the government preferred to sell some of its assets and orchestrated other schemes involving FX sales on the market. These sales kept the tenge too strong. Hence, tax revenues associated with the exchange rate remained subdued. This year, the government started raising additional ‘non-tax’ revenues, such as additional dividends from companies it owns combined with some other contributions, such as variou...