Kazakhstan macro: looking for a good year ahead

RUSSIA ECONOMICS - Report 18 Apr 2022 by Evgeny Gavrilenkov and Alexander Kudrin

The Kazakh National Bureau of Statistics published the 1Q22 economic indicators, and it looks as though the Kazakh economy was doing quite well during this period. The so-called "short-term economic indicator" (covering around 70% of the country’s economic activity) was up by 6.5% y-o-y in 1Q22. Industrial output was reported up y-o-y by 5.8% and 8.1% in 1Q22 and March alone, respectively. The Kazakh economics ministry estimated the country’s 1Q22 GDP growth at 4.4% y-o-y.

It is expected that the Kazakh economy will get an additional boost this year by filling some of the foreign trade niches that Russia left void because of having been hit by sanctions. Even though the Kazakh government explicitly said it won’t help Russia bypass the Western sanctions and will strictly comply with them, the usual trade between Russia and Kazakhstan will continue. Financially, Kazakhstan may get an additional boost from the inflow of Russian money as the CBR lifted restrictions on transferring rubles from the country.

Kazakh total foreign debt is rather high for a resource-rich country. However, the public foreign debt is rather low. The 2022 federal budget plan suggests that 7.8% of its expenditures would be spent on debt servicing. The 2022 budget also assumes that debt servicing would require 9.5% of its planned revenues. However, revenues will be much higher this year, so there will be no problem with debt servicing this year. Going forward, however, a rather high level of the country’s total foreign debt may carry some risks, especially as global interest rates are likely to rise. The bulk of this debt is on the side of the corporate sector, and a significant portion of the debt was issued with floating rates.

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