Kazakhstan macro: budgetary policy continues to evolve, reshaping the macro environment
In the past few days, the Bureau of National Statistics, the Ministry of Finance, and the National Bank of Kazakhstan published their regular monthly economic and financial statistics, which pointed to a continuous deceleration of economic growth amid moderating inflation. In such an environment, the National Bank of Kazakhstan decided to cut the base rate by 25 bps to 14.25%. In the minutes published after the NBK’s Committee on Monetary Policy meeting on July 12, the regulator referred to the gradual deceleration of inflation and falling inflation expectations. As June’s m-o-m inflation remained at 0.4% (i.e., was the same as in the previous month), it decelerated to 8.4% y-o-y. That being said, the base rate still remains relatively high in real terms, and the NBK’s policy looks cautious. At this stage, such a policy stance looks reasonable—even amid decelerating economic growth it still looks decent.
It looks as though some changes in budgetary policy contributed to the ongoing growth deceleration and the moderation of inflation. In the previous reports, we mentioned that as opposed to previous years, when timely and generous budgetary spending seemed to be a top priority for the Kazakh government, this year the government has become much thriftier. Even though republican budgetary expenditures increased this year again, this increase was not as significant as in 2022 or 2023. Moreover, in 5M24, out of KZT10.1trln of republican budget expenditures planned for this period, over KZT 1.3 trln remained unallocated. As at some point, the government will need to find a way to catch up with financing planned expenditures as inflation may start rising again. However, at this stage, the way they decide to do it remains unclear.
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