Kazakhstan macro: economic growth to moderate amid limited stimulus, murky stats

KAZAKHSTAN - Report 06 May 2024 by Evgeny Gavrilenkov

According to the Bureau of National Statistics of Kazakhstan, the short-term indicator (a monthly proxy for overall economic activity) grew by 4.7% y-o-y in 1Q24. It grew by 5.1% in 2023. The short-term indicator incorporates the segments of industry, agriculture, construction, trade, transportation, and IT/communication. As the quality of Kazakh economic statistics is far from perfect and has an enormous potential to improve, one has to look at a broad range of various indicators to solve statistical puzzles and grasp some hints about the economy’s direction.

All in all, the conclusion is that the y-o-y growth rates in many sectors, including industry, are posting no acceleration. Growth in industry is seemingly flattening at a level below 4% as in 1Q24 and March alone, industrial output grew by 3.8% and 3.0%. Nor can y-o-y growth acceleration be seen in many of the other segments incorporated in the short-term indicator—apart from agriculture, as the latter saw a setback last year due to weather conditions and bad harvest. No growth acceleration was reported for retail trade, which is another important segment of the short-term indicator and the economy in general. Consumer demand is cooling not least due to moderating household credit growth. More moderate budgetary spending in 2024 is another reason for cooling consumer demand (and domestic demand in general). All in all, it looks as though domestic demand will continue to moderate this year.

So far, current trends suggest that the Kazakh economy may grow by about 4.0% (and even slightly more), assuming that the tenge starts gradually weakening in mid-year once the government reduces FX intervention from the National Fund as its budgeted amounts move closer to the limit. In any case, we believe that the Kazakh government will be able to finance its budget expenditures in full and find additional revenues—one way or another. As the targeted nominal budget deficit this year is moderately higher than in 2023, while GDP will likely grow in nominal terms by about at least 10%, the republican budget deficit won’t change much relative to GDP—it will remain at 2.6%. Inflation will likely fall close to 7.0%. The current account deficit will be much narrower than in 2023.

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