Economic growth remains strong enough in October but is uneven among sectors

KAZAKHSTAN - In Brief 15 Nov 2024 by Evgeny Gavrilenkov

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As the tenge slowly climbs toward the USD/KZT 500 milestone mark amid some unwillingness of the regulators to see it weakening, as the NBK occasionally reiterates its intentions to “support” the currency, the Kazakh economy keeps growing relatively fast. This “support” largely stems from the need to sell FX from the National Fund to provide additional liquidity to the budget as tax revenues are dragged by the still strong tenge (especially in real terms). In October, the government instructed NBK to sell $1.340 bln. In November, total sales will amount to $1.2-$1.3 bln. Meanwhile, despite this “support,” the tenge keeps drifting toward more equilibrium levels, and it has enough room to weaken more, which will be good for the economy. Interestingly, the Kazakh currency weakens amid a relatively balanced current account. In 9M24, the current account posted a small deficit (about $230 mln) versus a massive deficit in 9M23 ($9.0 bln). In 3Q24, the current account was in a small surplus ($332 mln), while the tenge weakened as fundamental forces overshadowed the authorities’ efforts to “support” the tenge. So far, the short-term indicator (an aggregate monthly measure of economic activity in the industry, agriculture, construction, transportation/warehousing, communications, and trade) grew by 5.3% y-o-y in 10M24, i.e., at the same rate as in 9M24. The Bureau of National Statistics reported that the fastest y-o-y growing segments were agriculture (up by 12.7%), construction (10.2%), and transportation/warehousing (7.9%). The slowest growth the Bureau recorded in industry (2.6%). Communications expanded by 5.7%, and the trade segment was up by 7.3%. Retail sales grew by 8.7%,...