Kazakhstan macro: stable real effective tenge to support economic growth
The Kazakh tenge, having stabilized at around KZT/$ 430 after the initial pandemic shock and the fall of the oil price in 2Q20, experienced another shock in recent months. Its volatility increased again as the KZT/$ moved to well over 500 in early March and then bounced back to the same KZT/$ 430 level in May. As opposed to a similar spike in volatility in 2Q20, i.e., when oil prices fell sharply, the oil price (Brent) jumped after Russia moved troops into Ukraine. Since March, it has remained well above $100/bbl. It was the Russian ruble that caused trouble for the tenge as Russia and Kazakhstan have close economic ties (before bouncing back, the ruble initially weakened after a series of Western sanctions). Even though the tenge also weakened against major currencies in the aftermath of Western sanctions on Russia, it initially appreciated against the ruble quite significantly. Later on, however, after the ruble started to appreciate against “unfriendly" currencies, the tenge also weekend against the ruble. The fact that the tenge and the ruble have the same tipping points and move against the benchmark currency (USD) in the same direction but at a different pace may create some short-term speculative investment opportunities from time to time. Russia will continue to experience geopolitical shocks as Kazakhstan stays aside from geopolitical disputes.
Despite some fluctuations of the nominal tenge, the real tenge has remained relatively stable since 2016. It looks as though Kazakhstan’s macroeconomic policy implicitly aims to keep the real effective exchange rate of tenge stable. As the latter remains well below the 2013 level (and the real tenge is also much weaker against the euro and the dollar), the Kazakh manufacturing sector may benefit from this policy and grow in importance if it attracts enough investment and becomes more diversified.
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