Kazakhstan Economic Forecast

GDP growth gathered steam to 5.1% year on year in January–June (Q1: +5.0%). The mining sector was the primary driver of the acceleration. On the other hand, growth rates in the services and retail trade sectors slightly slowed. Turning to Q3, the economy is projected to lose momentum. In July, the services PMI was below Q2’s average. Moreover, suggesting a possible slowdown in private consumption, average growth in retail sales declined in July in contrast to Q2, despite the recent decrease in inflation. That said, July’s manufacturing PMI was above the Q2 average. In other news, in August, the government told oil firms operating in the Kashagan oil field that it would seek arbitration in a dispute over revenue sharing, potentially boosting the fiscal balance ahead but also perhaps deterring investment.

Inflation cooled to 13.1% in August from July’s 14.0% but remained well above the Central Bank’s 4.0–5.0% target range. As domestic price pressures ease and the base effect strengthens, inflation is expected to continue to decrease during the remainder of the year. Commodity prices are a key factor to watch.