Kazakhstan macro: economic growth to remain stable in 2023

KAZAKHSTAN - Report 22 Mar 2023 by Evgeny Gavrilenkov and Alexander Kudrin

Two weeks ago, the National Bank of Kazakhstan published its bi-monthly monetary policy report and enclosed its updated macroeconomic forecast for 2023 and beyond. Apart from the usual baseline scenario, the regulator considered two others, the “optimistic” and the “pessimistic” scenarios. From the commentary in the report, the NBK sees a number of risks in the current environment of elevated geopolitical uncertainty. Nonetheless, oil prices remain the most essential “exogenous” variable for the country’s economy. So far, the outlook for oil prices is to stay above the 2021 level (again, assuming other factors are equal, i.e., no financial distress globally or shocks originating from geopolitical issues). If so, then the Kazakh economy will remain in a calm external environment and deliver a decent rate of growth.
Even though this year oil prices may remain below the level expected in NBK's baseline scenario, the nominal tenge may remain relatively stable on an average annual basis (however, it is likely to weaken in 2024). If so, disinflation will be sustainable but inflation will remain elevated. We expect 4.2% real GDP growth this year as the baseline scenario, with upside potential. On the production side, the mining sector should bounce back this year, while on the end-use side, household consumption could be a leading factor for real growth as inflation decelerates relatively quickly. Exports will likely increase as well, on the back of the expected recovery in the oil industry. We still expect a current account surplus this year, albeit much narrower than in 2022 (in principle, it may even turn negative). Import growth may decelerate as Kazakhstan will likely reduce re-exports to Russia (to comply with Western sanctions). As the oil price stays, on average, below last year’s level one can expect foreign investors to repatriate fewer profits. This will help to keep the income balance from becoming too negative.

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