Kazakhstan in the Context of Unprecedented Challenges for World Economy

MEPEI organised the roundtable Kazakhstan – on the Way of Progressive Reforms. A New Chapter in Romania – Kazakhstan Cooperation on 15^th of May 2024 in Bucharest, an important conference with the participation of top speakers/representatives/experts (including HE the Ambassador of Kazakhstan in Romania).

I had the opportunity to present the macroeconomic component of this event, with the title Kazakhstan in the context of unprecedented challenges for world economy.

The presentation started with the unprecedented challenges the world economy has been recently confronted with, continued with the macroeconomic outlook for Kazakhstan and ended with the focus on the challenges and opportunities for this country.

At the beginning of the presentation, I underlined the fact that the world economy is currently crossing the period of the Great Transformation (which started in the context of the outbreak of the coronavirus pandemic), dominated by the transition towards a New World Order, identification of new models of growth and development and the implementation of the Digital Revolution and Artificial Intelligence Revolution.

In 2024 the world economy continues to be confronted with the consequences of the exogenous shocks of the past years, while the risks for the outbreak of new crises in the coming quarters are on the upside, given the total confrontation USA-China (the largest economies in the world, with a contribution of over 40% to the world GDP), the geo-economic fragmentation, the tough stance of public finance in USA, the high level of the real interest rates, the arms’ race, the subsidies’ race and the unsustainable euphoria on the global capital markets.

However, the economy of Kazakhstan has presented a strong resilience to the exogenous shocks in the recent quarters, given the structural reforms under implementation, and the upward trend for the voice of the emerging countries at the world level.

For instance, the GDP grew by an accelerating annual pace of 5.1% in 2023, the best performance since 2013, according to the estimates of the International Monetary Fund (IMF)[1].

There can be noticed the increase of the investments and private consumption, evolution also influenced by the fiscal stimulus (the IMF statistics reflect the fact the public finance presented a deficit of 1.5% of GDP in 2023 vs. a surplus of 0.1% of GDP in 2022).

For instance, the capital investment in the non-resource sectors advanced by an annual pace of 80%, while the volume of the retail sales increase by an annual pace of 7% in 2023, according to the figures of the World Bank[2].

As regards the supply-side perspective, there can be noticed the increase of the oil production by an annual pace of 6% in 2023.

In this context, the average annual rate of unemployment declined to 4.7% in 2023, a record low level for the past decades, as reflected by the databases of World Bank and International Monetary Fund (IMF).

The consumer prices grew by an average annual pace of 14.6% in 2023, slowing down from 15% in 2022 (according to the IMF database), in the context of the monetary policy implemented by the central bank.

The YoY pace of inflation continued the deceleration process in 2024, to 8.7% in April, an evolution that determined the central bank to cut the monetary policy rate to 14.5% at the May meeting[3].

In the Spring (April) 2024 macroeconomic scenario IMF forecasts the continuity of the post-pandemic recovery in Kazakhstan in the coming years, with growth paces of 3.1% in 2024 and 5.6% in 2025, as can be noticed in the following chart.

Figure 1. The evolution of the GDP in Kazakhstan vs. world (%, YoY)

Source: Spring Macroeconomic Forecasts, International Monetary Fund (IMF), 2024

If applying econometric methods while using IMF database there results that the potential YoY pace of the Kazakhstan economy presented an upward trend since the pandemic year 2020, being estimated at present at around (3.5% – 4.0%), the highest level in more than one decade.

In the April 2024 scenario of IMF, the unemployment rate would consolidate around record low levels, while the YoY pace of the consumer prices would maintain on the downward trend, to 7.0% in 2025, the lowest level since the pandemic year 2020.

As regards the macroeconomic equilibria, the IMF experts forecast the widening of the budget deficit and current account deficit in 2024 (to 2.2% of GDP and 4.5% of GDP), followed by an adjustment in 2025 (to 1.9% of GDP and 2.7% of GDP, respectively), as can be noticed in the following chart.

Figure 2. The evolution of the public finance and current account in Kazakhstan (% GDP)

Source: Spring Macroeconomic Forecasts, International Monetary Fund (IMF), 2024

Among the risk factors for the evolution of the economy of Kazakhstan in the coming quarters IMF mentions: the world and regional macroeconomic climate, the floods, the inflationary pressures fueled by the increase of the tariffs on energy and utilities, the fluctuations of the international oil prices.

On the other hand, one of the main challenges for the economy of Kazakhstan in the mid-run consists in the increase of the investments – the total investments / GDP ratio presented a downward in the recent years, towards the lowest level since the end of 1990s, according to the IMF database April 2024.

Also dependent on the acceleration of the structural reforms, the increase of the investments would contribute to the acceleration of the convergence of the Kazakhstan economy towards the developed countries – in 2023 GDP/capita at purchasing power parity in this country stood at 50% of the average level in developed countries, as reflected by the IMF statistics.

In this context, I emphasize the maneuver room in terms of fiscal policy in the mid-run, as the level of the public debt / GDP ratio is low (around 23% in 2023, according to IMF).

[1] International Monetary Fund (2024). World Economic Outlook Database, April 2024 (imf.org)

[2] World Bank (2024). Kazakhstan Overview: Development news, research, data | World Bank

[3] International Monetary Fund (2024). IMF Staff Concludes Visit to Kazakhstan