Kazakhstan macro: The tenge has weakened in recent months but still looks too strong
The National Bank of Kazakhstan recently published its first estimate of the 2Q24 balance of payments, which revealed that after briefly showing a surplus in 1Q24 the current account balance once again turned red. Being negative is the more usual condition for the Kazakh current account as the income balance remains negative amid consistently strong repatriation of profits by foreign investors. In 1Q24, the current account turned positive as the income balance appeared less negative than previously—possibly not least because some Russian-owned entities (such as banks) exited the Kazakh market. The 2Q24 statistics also showed that the repatriation of profits was below the 2Q23 level. The services balance also turned less negative as imports of services declined while services exports didn’t change that much. It appears that Kazakhstan has become a more important transit route for various neighboring countries—be it China exporting to Europe or Russia exporting to Asia. Hence the remarkable change in the country’s services sector, which has affected the structure of the balance of payments. Going forward, we may expect a further evolution of Kazakhstan in the same direction, toward being an increasingly important transit country. This evolution has already affected the USD/KZT and will remain an increasingly important factor for the tenge.
The tenge has to return to its more traditional trend of moderate depreciation against the dollar as the government will at some point stop intervening as much as it did in recent years. Hence a moderation of budgetary spending is a way out of the current deadlock—a too-strong tenge, a slowing economy, still high inflation (0.7% m-o-m in July) and a permanent search for various “non-tax revenues” to feed the republican budget.
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