Kazakhstan macro: The tenge is searching for equilibrium but the journey is not over yet
The Kazakh economy performed well in November, as the short-term indicator grew y-o-y by 5.6% in 11M24. Agriculture (up by 13.4%), construction (up by 10.3%), and retail sales (up by 9.3%) were the fastest-growing segments (all figures are y-o-y). Meanwhile, in November alone, retail sales increased by 9.8% y-o-y. Rapidly expanding household lending was one of the key drivers for the accelerated activity in housing construction and retail sales. At the same time, despite rapidly growing construction, investment in production capacity grew by a mere 1.9% y-o-y in 10M24 (the 11M24 statistics will be published on December 20) as various schemes to extract additional revenues from state-owned companies, such as dividends for previous years or higher-than-usual 2024 dividends, helped to inflate non-tax income this year amid insufficient tax revenue flow capped by a too strong tenge. Hence, investment activity remained sluggish this year, while private consumption and retail sales were booming—apart from steadily growing credit, they remained the key drivers of economic growth because of generous budgetary spending.
Since mid-2024, the tenge has lost about 20% of its nominal value relative to the dollar, and there is room for further weakening. The recent tenge correction and its future possible adjustment will be healthy for the Kazakh economy due to more tax revenues for the budget (linked to the exchange rate) and less interventionist macroeconomic policies. The latter means fewer FX interventions and no need to squeeze corporate taxpayers for additional non-tax revenue. If so, the corporate sector will have more resources to resume investment in production capacity.
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