Kazakhstan macro: Economic growth is stable but the tenge remains too strong
A few days ago, the Bureau of National Statistics of Kazakhstan published its usual updates on the country’s key economic indicators. The figures indicated that the economy continued to grow at a decent pace, albeit unevenly across sectors. Earlier, the Ministry of Finance reported that tax collection lagged well behind the plan (the latest budget execution statistics are available for 10M23). A too-strong tenge is the main drag on tax revenue flow—especially amid lower (than in 2022) oil prices as mineral products (including energy resources) represent the bulk of the country’s exports. The dollar value of Kazakhstan’s exports fell by 8.9% in 10M23. Hence, it was not surprising to see that tax collection for the republican budget was behind the plan by a comparable rate. The increased volumes of oil and gas extraction were insufficient to offset the effect of the stronger tenge.
A too-strong tenge also fueled the growth of imports to match rapidly expanding domestic demand. The latter was fueled by generous budgetary spending and booming consumer credit. A shrinking trade surplus and widening current account deficit was the result. All in all, the foreign trade statistics hint that the tenge should weaken at some point—by at least about 10%. This year, the tenge, on average, is as strong as it was in 2022—despite over 20% inflation in 2022 and about 10% inflation this year. FX sales from the National Fund that compensated for the lack of tax revenues grew in recent months and were close to the country’s monthly trade surpluses. Apart from that, capital inflows also supported the tenge. However, these inflows are unlikely to be stable or sustainable.
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