Kazakhstan macro: The unexpectedly high rate of economic growth in 4Q24 is unlikely to persist in 2025
In a few days, Kazakhstan’s Ministry of Finance will publish budgetary statistics for the entire year 2024, but it looks as though spending soared in December. It already started accelerating in October-November. We mentioned earlier that apart from the generous budgetary stimulus, expanding household credit stimulated not only retail sales but also construction activity, as mortgages accounted for an essential part of this lending. We also mentioned that government spending increased significantly in 4Q24 due to amended expenditures and also because some expenditures were suspended in 1H24, as the government tried to find additional cash to finance them amid a lack of tax revenues. Hence, accelerated inflation and pressure on the tenge in 2H24.
Amid rapidly expanding domestic demand various service sectors benefitted in 4Q24 and 2024 in total. For instance, wholesale trade was up by 8.6% last year, and total trade (retail and wholesale combined) by 9.1%. Transportation and warehousing grew by 8.5% in 2024. Kazakhstan is gradually becoming a more service-oriented economy as it offers various trade routes connecting Europe and Asia (China in particular). China and Russia are the nation’s two largest trade partners. In terms of total foreign trade turnover these two countries account for over 40% of Kazakh foreign trade. China is the largest export destination for Kazakhstan, while Russia has the largest share of Kazakh imports. However, statistics show that Kazakh foreign trade hasn't grown much in recent years. The country is gradually becoming a more domestically oriented economy, and its geographical location is helping to develop certain export-oriented services sectors, such as communications, transportation, finance, and insurance. These trends will strengthen in the years to come and the economy will gradually become less sensitive to oil price fluctuations.
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