03/01/2024, 08.59
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Kazakhstan's economic growth

by Vladimir Rozanskij

Despite the negative effects of the conflict in Ukraine, the World Bank forecasts a substantial increase in Astana's GDP over the next two years thanks to the expansion of production capacities in oil extraction. There is also optimism about the containment of inflation.

Astana (AsiaNews) - According to the latest World Bank report, substantial and progressive economic growth is expected in Kazakhstan in the next two years, despite the compulsive factors of the global geopolitical situation.

The negative effects of the Russian invasion of Ukraine have however slowed down this growth, which is expected to reach +3.4% of GDP in 2024, essentially due to the lowering of oil extraction levels.

Despite these factors, the real GDP of the republic will grow by up to 4.5-5% by 2025, thanks to the expansion of production capacities in the places of oil extraction, which will stimulate the export of derivatives and the increase in oil processing. the petrochemical industry.

Investments in this sector will follow a constant vertical line, and expenditure for the domestic economy will increase in parallel with the decline in inflation and the softening of financial conditions.

Inflation will decline while remaining above the National Bank of Kazakhstan's (NBK) forecast level for 2024-2025, following a downward line that began in 2023, in which it fell to just below 10% in December after policy tightening credit finance. Now the aim is to go down to 5%, and it is starting to appear real, provided that control over finances is not relaxed for the implementation of state budget consolidation plans.

The Kazakh banking system continues to appear solid and resistant to shocks coming from outside. In November 2023, the share of rejected loans stood at 3.2%, and banks continue to maintain a satisfactory level of financing and liquidity, containing the risks of the rising credit curve, which however requires very active surveillance to absorb any negative consequences.

The increase in imports and the fall in export earnings, against the background of falling oil prices, has resulted in a current budget deficit of around 3.3% of GDP for 2023. The gross international reserves of the NBK can cover seven months of this imbalance, and a progressive decline in the deficit is expected by 2024, while a notable flow of foreign investments is expected, mainly in the extractive industry sector.

The budget forecast for the two-year period 2024-2026 therefore moves in the perspective of consolidation, with programs to stimulate social guarantees, which have reduced the budget deficit to 1.8% of GDP in 2023.

The government plans to continue along this line, maintaining “budget buffers” in fiscal policy and containing Kazakhstan's public debt to acceptable levels. Debt assistance costs will grow, with fairly heavy shares of fiscal policy.

The risks of destabilization remain real both inside and outside the country. Tensions in the Black Sea related to Russia's war in Ukraine make the transportation of Kazakh oil through the Caspian Sea pipelines quite difficult, with frequent maintenance and reconstruction needs, as occurred around Novorossiysk in 2022.

Some unexpected delays, such as that of the Tengiz extraction wells, are due instead to internal tensions between the administrations and the working staff, with frequent protests over unacceptable exploitation conditions.

These and other factors make the price of the tenge, the local currency, rather volatile, which could negatively impact inflation levels. In general, economic relations with Russia, always very significant, and the risks of secondary sanctions for circumventing prohibited imports, keep the Astana government in a permanent state of alert. But there remains high confidence in being able to exploit the difficulties of this historical phase in favor of real growth of the country, and of all of Central Asia.

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