The Kazakh government expects the economy to grow around 4% in 2023

KAZAKHSTAN - In Brief 31 Aug 2022 by Alexander Kudrin

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At a government meeting last Friday, the authorities presented their view on the country’s economic growth in 2023 and beyond and discussed various scenarios. The baseline scenario assumes that the oil price would stay at $85/bbl on average and the KZT/$ averages at 470 in 2023. GDP is expected to grow by 4.0% then. The optimistic scenario assumes a $110/bbl price, KZT/$ at 440, and a GDP growth of 4.2%. In the pessimistic scenario, GDP is expected to grow by 3.5% (under the assumption of a $60/bbl average annual oil price). The government expects inflation to fall to the 7.5-9.5% range in all three scenarios. In 2024, inflation is expected to go down to 4-5%, and in the year to follow to 3-4%. The assumptions and the government expectations do not look unreasonable. The cut-off oil price for the fiscal rule is chosen at $48.9/bbl implying that oil windfalls above this price will be accumulated in the National Fund. The government expects that the annual amount of the so-called guaranteed transfer from the National Fund will be equal to the total inflows to the fund in 2023. It will account for KZT 2.2 trln next year. In the following years, it will decrease to KZT 2.0 trln, and KZT 1.9 trln. The cut of oil price in 2024-25 is chosen at $42.2/bbl and $40.3/bbl. In addition to the guaranteed transfer, the budget will receive targeted transfers to close the financing gap. Given the amount of the already accumulated savings in the National Fund, the fiscal situation in Kazakhstan looks very secure. Evgeny Gavrilenkov Alexander Kudrin