top of page
Поиск
  • Admin

Kazakhstan - Economy and industry overview 2016/2020

Обновлено: 23 февр. 2022 г.



Pro-cyclical growth inspired by external demand

Kazakhstan is so far susceptible to external demand change and as a consequence to energy and commodity prices’ fluctuations. Two years energy and commodity prices uptrend reanimated the economy and its 1% yoy GDP growth in 2016 accelerated to 4.1% yoy in 2017. In 1H2018, energy external demand as well as prices upside continued to favor the economy and it made 4.1% yoy of real GDP growth. Growth in 5M2018 of the current year decelerated to 3.9% according to the ministry of national economy but managed to recover its growth rate in 6m2018.

Figure 1 GDP growth in Kazakhstan, 2010-2021F


Source: NBK, company’s calculations

Brent price peaked as high as US79.8 per barrel in April and averaged US71.2 per barrel in the first half of the year. The global demand for energy had been high and external demand of the major trade partners for Kazakhstan’s crude oil and metals set the local economy (especially its mining sector) in action. Thus, industrial production in 1H2018 reached 5.2% yoy while in 1H2017 it was a notch higher at 5.5% yoy. The major contributors to industrial production were crude oil and gas output that increased by 6.2% yoy and ore production that made 3.4% yoy. Manufacturing expanded by 5.2% yoy. Chemistry industry (11%) and machine building (17.2%) contributed the most to the growth of manufacturing in the country. Oil processing industry made 4.4% yoy in 1H2018.

Forecast: driven by relatively high energy prices that we envisage at USD70.35 per barrel of Brent until the end of the year, the economy would made up 3.8% in 2018. We a bit concerned by the possible imposition of the US government sanctions on the Russian Federation in the second half of the year as well as by the trade wars that the US threatens to implement with the China. Both scenarios implemented, the economy growth might decelerate to 3.7%. Nominally economy will expand to KZT58,396bn or circa USD174bn (FX rate 335.7 period average). Industrial production will increase by 3,5% yoy.



Investments


Investments reflect external demand


In 1H2018 the fixed capital investments increased by 25.8% yoy to KTZ4,530 bn. Circa 43,1% of the total investments went into mining industry of the republic. Investments in oil processing amounted to 6.3% while in metallurgy it reached 2.1%. Investments in transportation and storage made up 13% in the period. Investments in agriculture shared 2.8% of the total investments in the period.

Gross Foreign direct investments (FDIs), according to the currently available data of the NBRK for the 1Q2018, increased by 47.4% yoy and amounted to USD6,682m. Half of the investments 50.4% or USD3,370m went into extraction of crude petroleum and natural gas. Annual increase of the investments in the sector jumped by 3.1 times. Investments in metallurgy accounted for 15.7% or USD1,050m. Annual growth amounted to 62%. Wholesale and retail trade received 13.3% of the investments in 1Q2018 or USD890m. Investments expanded by 3.6 times in the sector in 1Q2018. Thus, three directions of gross FDIs made up 79.5% of the total gross inflow.


Figure 2 Gross FDIs in Kazakhstan, USDm

Source: NBK, company’s calculations

Total amount of gross FDIs outflow reached USD324m that was by 2.7 times less than in 1Q2017. The most noticeable outflow of gross FDIs were from financial sector 40.2% or USD130.4m in the period. Wholesale and retail industry had USD17.9m of outflow. Food industry USD3.2m, from chemical industry USD7.2m and metallurgy USD USD3.6m had the least outflow. The gross FDIs outflow from extraction of crude petroleum and natural gas were not registered.

Therefore, the procyclical growth of the economy driven by the external demand for the mineral resources of the country pre-determines outside investments in the country.

Forecast: we expect the further outflow of FDIs from the country meanly from the financial sector since the non-residents holders of the sovereign debt of the country decrease their investments in the public securities of the republic. Thus, as of the end of the June the foreign holding of the sovereign debt (mostly NBRK short-term notes) decreased from KZT464bn to KZT361bn. High external demand for energy and commodities will persist this year thus we expect the FDIs outflow will be balanced by investments in oil and gas industry as well as metallurgy.


Inflation


Inflation is under control

Consumer price inflation in Kazakhstan in 2015-2016 was two-digit (17.7%) and resulted from August 2015 devaluation. After the devaluation, the NBRK prioritized inflationary targeting policy and switched to free float of the national currency, though managed so far. Pursuance of the policy helped the regulator to curb the two-digit inflation and as the end of 2017 it reached 7.1%. The base rate was as high as 17% in 2016 and slowly was lowered to 10.25% at the end of 2017.

In 1H2018, CPI reached its lowest level for the last three years to 5.9% yoy due to low food prices that slid from 5.9% yoy to 4.2% yoy in June. Non-food prices remained almost unchanged during the 1H2018 with slight change from 8.4% to 8.5%. Payable services also evidenced decline to 5.5% in June. The metrics shows that the current inflation level is within the targeted inflation band set by the NBRK for 2018 at 5%-7%. Since the inflationary pressure subsided over the economy, he NBRK continued to lower the base rate from 9.75% in the beginning of the year to 9% in June.


Figure 3 CPI by component, % in 2017-2018



Source: Committee on Statistics of Kazakhstan

Forecast: CPI will remain within the set band of the NBK until the end of the year. The inflationary pressure will persist and will be transmitted to the economy though foreign currency channel that recently evidenced weakening. Energy prices that rallied recently also produce pressure on consumers’ prices that are expected to hike in autumn and close to the end of the year. We also expect a slight inflationary pressure through trade channels since crawling devaluation will make imports more expensive in tenge. All factors considered, inflation would end the year at 6.4% according to our projections.

Figure 4. CPI projections for 2018-2021



Source: NBK, company’s calculations


FX rate


USDKZT rate reflects USDRUB movements


In August 2015, the NBRK arrived to a decision to make the national currency of the republic a free float. The FX rate is formed at the KASE stock exchange during the trade sessions twice a day. Since the autumn of 2017, the NBRK is not present at the market through interventions. Largely the FX rate of the republic is under the influence of two principle factors: the first is energy quotes, the second is USDRUB quotes. Recently, we also observed carry trade operations with the short-term notes of the NBRK. Altogether, the FX rate has the tendency to weaken in the second half of the year and strengthen in the first. The first part of the year coincides with the inflow of the export proceeds from abroad as well as with the tax paying. In the summer, the FX rate suffers weakening since people go abroad for holidays.


Figure 5. Trade volume and USDKZT FX rate 2017-2018


Source: KASE

Forecast: this year we expect USDKZT will be at 340-345 at the end of the year. The possible scenarios are in close relation to the USDRUB situation that might become volatile if additional sanctions will be imposed at the Russian Federation. We do not expect expansion of American sanctions on the sovereign debt of the Russian Federation since the Ministry of US has strongly claimed that it against of such an imposition. However, the sanctions might be expanded in reference to oligarchic families close to the President and Kremlin circles. If imposed, we expect the USDRUB to become volatile again as it was in April.


Figure 6 USDKZT period average FX rate and Brent quotes quarterly projections2019-2021



Source: NBK, company’s calculations

Volatility of Russian ruble in April 2018 translated itself at USDKZT rate and it went weak from 318.31 tenge in March to 327.25 tenge per US dollar in April as the end of the period. In 2018-2019, we expect energy prices will level at USD69-71 per barrel of Brent and it will give a support to USDKZT quote. USDRUB quote will be at 64 rubles per US dollar as of the end of the year. USDRUB quote will be supported by relatively high prices of energy prices while the fiscal budget rule will keep the quote away from strengthening. We believe the USDRUB will be nor less than 62-63 rubles per dollar in 2019 unless the cutoff level under the budget rule will be reviewed by the Russian Duma. The average FX rate for USDKZT will 339.5 tenge per USD dollar as of the end of this year. A period end we expect USDKZT to reach 352.5 tenge per US dollar.


External trade


External demand pre-determines the countries trade


Figure 7. External trade of Kazakhstan, USDbn



Source: NBK, company’s calculations

As of 2017, exports of Kazakhstan increased by 32% yoy and amounted to USD48.3bn. Circa 17% of exports of the country went to CIS countries. Mineral products shared 63.5% of total exports of the republic. Metals and metal products approximated 18.1%. Chemical industry products made up 5.1%. Three export items amounted to 86.7% of the total structure. In 1Q2018, exports of the country increased by 27.8% and amounted to USD14,1bn. Mineral products shared 72.7% of exports while metal and metal products made up 16.4%. Chemical products decreased to 2.9%. Thus, high quotes of energy prices and expanding external demand reshaped exports’ structure and made it less diversified. The major two items made up 89.1% of the total.

Figure 8 Exports by country Figure 9 Imports by country




Source: Committee on Statistics of Kazakhstan Source: Committee on Statistics of Kazakhstan


In 2017, imports increased 15% yoy and reached USD29.3bn. Machines and equipment made up 37.7% of the total imports while chemical industry products shared 16.7%. Another 11.7% of imports accounted for 11.7%. Products of animal and plant origin approximated 11.7%. Therefore, four items amounted to 77.8%. In 3M2018, the structure hardly changed and was composed by 38.1% by machines and equipment, chemical products made up 15.4%, animal and plant products reached 11.1%, metals and metal products were 11% of imports. In 1Q2018, imports of the country increased by 13.8% and amounted to USD7.6bn. In 1Q2018, the structure hardly changed and was composed by 38.1% by machines and equipment, chemical products made up 15.4%, animal and plant products reached 11.1%, metals and metal products were 11% of imports.


10 просмотров0 комментариев

Недавние посты

Смотреть все

In 2021, rising commodity prices, significant inflows of budgetary and non-budgetary funds to the real sector of the economy, as well as the acceleration of consumer lending, and the withdrawal of sav

bottom of page