KAZAKHSTAN MACROECONOMIC OVERVIEW, June 2022

COVID-19 is gradually fading from its position as the headliner of world news. On the agenda are the war in Ukraine, the worsening food crisis, the disruption of supply chains and rising global inflation. In the post-pandemic period, central banks around the world tried to raise rates to keep inflation in check, but the shock of the war made matters worse. The geopolitical backdrop creates even more uncertainty for the global economy outlook. Since the Cuban Missile Crisis of 1962, the world has never come so close to a nuclear disaster.

The World Bank downgraded its forecast for global economic growth in 2022 to 2.9% from 4.1% expected in January. The US economic growth forecast for the current year was lowered to 2.5% from 3.7%, and for the next year to 2.4% from 2.6%. The growth forecast for the Chinese economy for the current year was lowered to 4.3% from 5.1%, for 2023 to 5.2% from 5.3%.

According to the Ministry of National Economy of the Republic of Kazakhstan for 5 months of 2022, the growth of the economy of Kazakhstan amounted to 4.6%. The volume of industrial production increased by 4.4%: in manufacturing - by 5.3%, in mining - by 4.3%, in water supply - by 2.8%. The decline in production was recorded in the supply of electricity - by 0.2%. Agriculture grew by 1.3%, trade - by 10.8%, transport and warehousing - by 8.1%, communications - by 7.2%. The volume of investments in fixed assets increased in January-May 2022 compared to the same period of the previous year by 2.5%.

In this Macroeconomic Review of Kazakhstan, with a forecast for 2022, AERC has developed three scenarios in the aggregate demand model of the SMAF modeling system: pessimistic, baseline, optimistic. The baseline scenario was based on the following assumptions:

• the price of Brent crude oil will average for 2022 at the level of $107.4/bbl;
• growth of the economies of the countries-trading partners in 2022 - 2.5%;
• the volume of oil and gas condensate production in Kazakhstan in 2022 will achieve 85 million tons.

Under these conditions, according to the aggregate demand model, AERC forecasts real GDP growth in Kazakhstan in 2022: according to the baseline scenario, by 2.7%. Based on the aggregate supply model, GDP growth in 2022 is expected by AERC to be 3.2% in real GDP growth in Kazakhstan in 2022. The consensus forecast for Kazakhstan's economic growth based on aggregate supply and demand models for 2022 is 2.9%. Inflation in the baseline scenario in 2022 in Kazakhstan will be at the level of 15.7%, as a result, tightening of monetary conditions.