Kazakhstan Economic Forecast

Economic growth accelerated to 4.9% in Q1 2023 compared to 3.3% in 2022. The acceleration was driven in part by a base effect—a large demonstration stifled domestic demand in January 2022. Looking at a breakdown by sector, industrial output rose more sharply, particularly in manufacturing, construction and mining, as did services output, amid stronger transport and retail production. That said, growth of agricultural output decelerated sharply. Turning to Q2, GDP growth should slow somewhat from the high reading seen in Q1. Nevertheless, available data has been upbeat: In April compared to Q1, the economic activity index rose more quickly and industrial output gained speed, while in April–May average inflation dwindled to its lowest reading since Q2 2022. This, along with the Central Bank keeping interest steady in the quarter thus far, bodes well for domestic demand.

Inflation came in at 15.9% in May, down from 16.8% in April but still well above the Central Bank’s 4.0–6.0% target range. Slowing domestic inflationary pressures and declining commodity prices should push inflation down further throughout the year. That said, increased government spending and faster-than-expected monetary loosening are upside risks.