Kazakhstan macro: strong inflow of tax revenues in the republican budget hints the economy is in good shape
According to the Bureau of National Statistics the short-term indicator that takes into account economic activity in six main sectors (industry, agriculture, construction, transport, trade, and communications) grew by 5.0% y-o-y in January. These sectors represent around 60% of GDP. At the same time, First Vice Minister of National Economy Timur Zhaksylykov said at a government meeting that in January 2023, the growth rate of Kazakhstan's economy was 5.6%, including growth in the "real" sector of 2.3%, and in the service sector of 7.6%.
These economic developments are fully matched by the budget execution statistics as tax collection proved to be in line with the plan, and in some cases ahead of it as January in usually a month with relatively low tax collection. The government anticipated lower tax revenue to be collected in January, and it looks as though not only high inflation, but also the ongoing economic recovery helped to collect more taxes. Detailed budgetary statistics show that VAT on domestically produced goods as well as on imported products significantly outpaced the January target. Income taxes outpaced the monthly collection plan, as well. The republican budget deficit will likely be below the target this year. It seems that in the months to come, the revenue flow will be well above the plan both in the case of the republican and the local budgets, which will be a rather unusual situation.
It is yet to be seen what the government will do in such a situation. Will it amend expenditures, which are already set at high levels, or will it reduce transfers? There are some other options on the table, as well.
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