Kazakhstan’s Macroeconomic Overview, October 2022

International organizations in their forecasts note the increased uncertainty that has prevailed since the beginning of Russian military aggression. In the October World Economic Outlook, the IMF did not change its forecast for global economic growth for the current year (3.2%), but lowered its forecast for 2023 from 2.9% to 2.7%. The IMF also indicated a 25% probability of a slowdown in global economic growth to 2% in 2023. The World Bank, taking into account the adopted review release schedule, has not yet adjusted its June forecast for global economic growth for 2022 (2.9%).

The global economy, faced with the consequences of COVID-19 in the form of disrupted supply chains, rising inflation and affected by the escalation of the war in Ukraine, is at risk of falling into recession. The IMF states that more than a third of the world economy is expected to contract this year or next.

According to the Ministry of National Economy of the Republic of Kazakhstan, for the 9 months of 2022, the economic growth of Kazakhstan amounted to 2.8% compared to the 9 months of 2021. There is a damping of the monthly growth rate of industrial production: in January-September 2022, production growth was only 2.1% , including the mining industry - 0.1%, manufacturing - 4.6%, water supply - 1%. A decrease in production volumes was also recorded in the supply of electricity by 0.4%. Agriculture grew by 6.9%, information and communications - by 6.7%, construction - by 5.1%, transport and warehousing - by 4.8%, trade - by 4.3%. The volume of investments in fixed assets increased by 7% compared to the same period last year. Despite the weak recovery of supply chains, Kazakhstan’s exports, due to rising commodity prices in the first 8 months of 2022, increased 1.5 times compared to the same period last year; despite sanctions against Russia (38.5% in the import structure), imports increased by 15.6%.

Inflation in September amounted to 17.7% y/y, including for food products - 22.2%, for non-food products - 17% and for services - 12.3%. Thus, the real interest rate in the economy is in the negative zone, which requires more decisive actions by the National Bank of the Republic of Kazakhstan, the decision on the base rate of which is expected on October 26, 2022.

In this review, when assessing macroeconomic indicators for 2022, AERC developed three scenarios in the aggregate demand model of the SMAF modeling system: A, B (baseline), C. The base scenario was based on the following premises:

• the price of Brent oil will average for 2022 at $102.09/barrel;

• growth of the economies of Kazakhstan’s trading partners in 2022 – 1.1%;

• the volume of oil and gas condensate production in Kazakhstan in 2022 is 84 million tons.

Under these conditions, AERC estimates the growth of real GDP of Kazakhstan in 2022 according to the aggregate supply model and the aggregate demand model at the level of 2.9% compared to 2021. The forecast for the growth rate of real GDP according to the aggregate supply model coincided for 2022 with the base forecast of the aggregate demand model. For 2023, AERC forecasts the expansion of economic activity and the achievement of real GDP growth according to the aggregate demand model at the level of 4.1%, according to the aggregate supply model - 3.9%. Inflation in the base scenario in 2022 in Kazakhstan will be at the level of 13.8% y/y, in 2023 - 8.1%.