Kazakhstan can expect GDP growth of 3.1% this year and 5.6% next, says IMF

By bne IntelliNews April 21, 2024

The International Monetary Fund (IMF) projects real GDP growth of 3.1% this year and 5.6% in 2025 for Kazakhstan in its newly released World Economic Outlook April 2024 edition.

Last year, Kazakhstan recorded growth of 5.1%.

The Fund also gave new projections for Kazakhstan’s consumer prices, current account balance and unemployment (see table below).

The IMF also released the April edition of the Fund’s Middle East and Central Asia Regional Economic Outlook, headlined “An uneven recovery amid high uncertainty.”

In the regional outlook, it said that inflation remained above central bank targets in both Kazakhstan and Uzbekistan—the biggest and second biggest economies of Central Asia, respectively—last year due to strong domestic demand and persistently high inflation expectations.

In another note on the region, the assessment said: “Despite continued inflows, fiscal balances deteriorated in several CCA [Caucasus and Central Asia] countries. On average, fiscal balances deteriorated to –1.3 percent of GDP in 2023 (after recording a surplus of 0.5 percent in 2022). This deterioration was largely due to lower oil and gas revenues among oil-exporting economies and a fiscal expansion in Uzbekistan (public sector wage hikes, social spending, and energy subsidies).

“Nonetheless, public sector debt ratios remained broadly stable in 2023 at under 20 percent of GDP, on average, among CCA oil and gas exporters and about 40 percent of GDP for oil and gas importers, on average, significantly lower than those in MENA EM&MIs. Similarly, current account balances deteriorated in most CCA countries (Armenia, Azerbaijan, Kazakhstan, Uzbekistan) in 2023, mainly driven by lower oil prices, strong domestic demand, and partial normalization of remittances.”

The report also observed: “The CCA region’s footprint in global value chains has also expanded. Specifically, participation in global value chains—that is, the share of exports that is part of a multistage trade process—has increased in all CCA countries (except Tajikistan). At the same time, several CCA countries (Armenia, Azerbaijan, Georgia, Kazakhstan, Uzbekistan) have increased their use of foreign inputs in their production and exports, surpassing the volume of their exports used in the production of other countries’ exports.”

In a note relating growth to energy developments, the regional analysis said: “Following the strong performance in 2023, growth in the CCA is projected to moderate to 3.9 percent this year (a downward revision of 0.3 percentage point from October) before accelerating to 4.8 percent in 2025 (an upgrade of 0.4 percentage point). These revisions mainly reflect developments in Kazakhstan, where production increases from the Tengiz oil field were pushed back to 2025. Accordingly, growth in Kazakhstan is projected to slow to 3.1 percent in 2024 before a temporary but notable pickup to 5.6 percent in 2025. Meanwhile, nonhydrocarbon growth in oil-exporting economies is projected to remain robust (3.6 percent) in 2024.”

Public sector debt in CCA, said the report, is projected to remain at manageable levels. “Specifically,” the report added, “relatively low debt and interest expenses combined with high and stable nominal GDP growth are supporting stable or declining debt levels in most countries over the medium term. Still, a projected increase of 10 percentage points in Kazakhstan’s debt ratio over the forecast horizon, as the authorities are planning to increase the assets of the sovereign wealth fund, is pushing up the region’s overall debt-to-GDP ratio from about 25 percent of GDP in 2024 to just below 30 percent in 2029.”

In a foreword to the latest edition of the IMF’s global outlook report, the Fund’s economic counsellor, Pierre-Olivier Gourinchas, noted: “A troubling development is the widening divergence between many low-income developing countries and the rest of the world. For these economies, growth is revised downward, whereas inflation is revised up.

“Worse, in contrast with most other regions, scarring estimates for low-income developing countries, including some large ones, have been revised up, suggesting that the poorest countries are still unable to turn the page from the pandemic and cost-of-living crises. In addition, conflicts continue to result in loss of human lives and raise uncertainty. For these countries, investing in structural reforms to promote growth-enhancing domestic and foreign direct investment, and strengthening domestic resource mobilization, can help manage borrowing costs and reduce funding needs while achieving development goals. Efforts must also be made to improve the human capital of their large young populations.”

Looking at the global picture, Gourinchas said: “First, while inflation trends are encouraging, we are not there yet. Somewhat worryingly, the most recent median headline and core inflation numbers are pushing upward. This could be temporary, but there are reasons to remain vigilant. Most of the progress on inflation came from the decline in energy prices and goods inflation below its historical average. The latter has been helped by easing supply-chain frictions, as well as by the decline in Chinese export prices. But services inflation remains high—sometimes stubbornly so—and could derail the disinflation path. Bringing inflation down to target remains the priority.

“Second, the global view can mask stark divergence across countries. The exceptional recent performance of the United States is certainly impressive and a major driver of global growth, but it reflects strong demand factors as well, including a fiscal stance that is out of line with long-term fiscal sustainability (see April 2024 Fiscal Monitor). This raises short-term risks to the disinflation process, as well as longer-term fiscal and financial stability risks for the global economy since it risks pushing up global funding costs. Something will have to give.”

China’s economy, observed Gourinchas, remains affected by the enduring downturn in its property sector.

He concluded: “Credit booms and busts never resolve themselves quickly, and this one is no exception. Domestic demand will remain lackluster for some time unless strong measures and reforms address the root cause. Public debt dynamics are also of concern, especially if the property crisis morphs into a local public finance crisis. With depressed domestic demand, external surpluses could rise. The risk is that this will further exacerbate trade tensions in an already fraught geopolitical environment.”

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