ADB lowers forecast growth of Kazakhstan's economy

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The Asian Development Bank (ADB) has lowered its GDP growth forecast for Kazakhstan in 2024 to 3.8% compared to 4.3% in the previous review. In 2025, the indicator is expected to reach 5.3%. The actual GDP growth in 2023 was recorded at 5.1%, reports.

"The pace of economic growth in Kazakhstan in 2024 will slow down against the backdrop of industrial growth stagnation due to a slowdown in oil production and will then recover in 2025 due to an increase in oil production at the Tengiz field and investments. The prospects for Kazakhstan's economic growth in the medium term look positive," said ADB analysts.

However, according to them, the forecast may worsen due to potential negative consequences from Russia's invasion of Ukraine, slower GDP growth of trading partners, and possible disruptions in oil export routes. Iskandar Gulamov, Head of Country Operations at ADB in Kazakhstan, noted that the economy's dependence on raw materials makes GDP growth unstable. He emphasized the importance of structural reforms to ensure the country's economic stability.

According to the organization, the service sector will grow by 4.7% in 2024 and by 4.9% in 2025, driven by the development of trade, transportation, and hotel business. The industry will grow by 3.5% in 2024 and by 5.7% in 2025 as oil production increases.

ADB expects inflation to slow down to 8.7% in 2024, as in the December forecast. In 2025, it may reach 6.3% amid relatively tight monetary policy and exchange rate stability. Analysts believe that inflation will be affected by the announced increase in utility prices. In this regard, they predict a 9.8% increase in service prices this year and an 8.1% increase next year. Annual inflation as of March was 9.1%, with a monthly increase of 0.7%. Prices for paid services increased by 13.2% over the year, non-food items by 8.2%, and food items by 6.9%.

Analysts emphasize that subsidies in the financial sector need to be eliminated to remove distortions in the credit market. ADB notes that subsidies became widespread after the global financial crisis of 2008-2009. This creates excess liquidity and weakens monetary policy, analysts say.

Among the organization's proposals on this issue are the disclosure of the volume of financial support provided through subsidized lending, analysis of its alternative cost, transition to alternative financing approaches, adoption of a strategy for phased withdrawal from government programs of subsidized lending, as well as introduction of mandatory provisions on temporary frameworks and criteria for the success of these programs.

According to the National Bank's baseline scenario, the forecast for GDP growth in Kazakhstan for 2024 has been raised to 3.5-4.5% (3.2-4.2%), and for 2025 it remains at the level of 5.5-6.5%. In 2026, in the scenario of a decline in oil prices (to $77 per barrel), the indicator will be 3.5-4.5%.

In late August 2023, former Minister of Economy Alibek Kuantyrov presented a forecast for the socio-economic development of Kazakhstan for 2024–2028. It includes an average annual GDP growth rate of 5.8% over this period. In 2024, the economy is expected to grow by 5.3%, and by 2028, the growth rates will increase to 6%. The average annual growth rates in the industrial sector will be 4%.

The Center for Applied Economics Research (AERC) forecasts economic growth in Kazakhstan at 4.5% for 2024. In its forecast, AERC relies on factors such as future oil prices, inflation, and the growth of partner economies.

According to the International Monetary Fund's estimates, GDP growth will remain within 3-3.5% this year. According to IMF representative Nicolas Blanch, GDP growth rates will be more moderate than in 2023. One of the main reasons for this will be the reduction in oil production forecasts due to delays in implementing the Tengiz field expansion project.

According to the European Bank for Reconstruction and Development (EBRD), Kazakhstan's GDP will grow by 5% in 2024. The Eurasian Development Bank (EDB) is almost in line with the government, estimating GDP growth at 5% at the end of 2024. Analysts from the Russian rating agency ACRA predict Kazakhstan's economic growth at 4.7% in 2024 and 5% in 2025.

In September 2023, President Kassym-Jomart Tokayev tasked the government with achieving annual GDP growth of 6-7% to double it to $450 billion by 2029.

April 11, 2024