Kazakhstan macro: The art of financing budgetary expenditures
The Bureau of National Statistics of Kazakhstan started publishing economic data for February, and it looks as though economic growth remains relatively stable, albeit uneven across sectors and with some signs of deceleration. For instance, the Bureau reported that retail sales grew by 4.0% y-o-y in February. Even though the figure looked better than in January (3.7%), that month’s y-o-y growth was skewed by base effects in 2023, when as a whole, retail sales grew by 7.7%. Economic growth still looks good as the short-term economic indicator (a monthly proxy for GDP) increased by 5.2% y-o-y in 2M24, which is higher than in 2023 as a whole (5.1%). However, this year’s higher y-o-y number largely stems from a low base effect. Unfortunately, the Bureau doesn’t publish the m-o-m data for this indicator. Generally, a slight growth deceleration is seen in some other sectors, such as transportation and communications. The ongoing growth deceleration matches the recent thinking of the National Bank of Kazakhstan. In its recent quarterly publication on monetary policy, the regulator mentioned that it expects the Kazakh economy to grow by 3.5-4.5% this year in its baseline scenario (up from the 3.2%-4.2% range in the previous forecast). The forecast range is well below the 5.1% GDP growth in 2023.
Decelerating economic growth amid moderating inflation may negatively influence budgetary revenue flow—in addition to an overly strong tenge that limits collection of taxes directly linked to the exchange rate and the oil price. It is yet to be seen how the art of searching for extra revenues will develop this year if tax revenue collection remains poor. The easiest way would be to have a weaker currency. However, the need to finance planned expenditures non-stop forces the government to sell FX from the National Fund well ahead of plan and keep the tenge too strong.
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