Kazakhstan’s Macroeconomic Overview, January 2023

The topic of the January World Economic Forum in Davos, «Cooperation in a Fragmented World», clearly defines the dominant paradigm of the new 2023, where countries have taken their positions on Ukraine war. While developed countries fully support Ukraine despite their economic interests, some developing countries, without openly supporting Russia, continue trading with it. For example, China and India have received significant trade deficits with Russia due to increased import of cheap hydrocarbons. Over time, these countries may continue to “utilize” the benefits of the Russian oil price cap and become exporters of oil products to Europe.

Given the risks of a global recession and ongoing uncertainty, the World Bank has adjusted its forecast of global GDP growth for 2023 from 3% to a pessimistic 1.7%. IMF predicted the global economic growth at 2.7% in the World Economic Outlook (October 2022), which is 0.2 percentage points lower than the July forecast. At the same time, IMF noted that there is a 25% probability that the forecast for global GDP growth will fall below 2%. Economists polled by the WSJ believe that there is a 61% probability of a recession in the US in the next 12 months.

Despite global uncertainty, the threat of a recession and the difficulty of controlling inflation, we are more positive about 2023, considering the factor of “opening up” China and hoping for a speedy end of the war in Ukraine. In this review, when forecasting macroeconomic indicators for 2023, AERC developed three scenarios in the aggregate demand model of the SMAF modeling system: optimistic, baseline and pessimistic.

According to the baseline scenario of the aggregate demand model AERC forecasts the real annual GDP growth of Kazakhstan in 2023 to be 4.1% (as in the October 2022), according to the aggregate supply model ‒ 4.2%, which is 0.3 percentage points higher than in October 2022. For 2023, according to the baseline scenario, AERC forecasts a slowdown in annual inflation to an average of 9.8% (against 8.1% in October 2022), a current account surplus ‒ to be 2.3% of GDP (2% in October 2022), state budget deficit ‒ (-) 4.1% ((-)4.3% in October 2022).