Kazakhstan: Economic conditions continue to improve in H2 2016
December 28, 2016
Kazakhstan’s economic growth continued to improve in the second half of 2016, aided by an increase in oil prices and a stabilization in the country’s financial conditions. Comprehensive GDP data—on an expenditure basis—showed that the economy increased 0.4% in the January–September period from the same period of the previous year. The result fared slightly better than the 0.3% rise the markets had expected and followed a mild 0.1% increase recorded in the first six months of the year. Kazakhstan reports growth on an accumulated basis and in full year 2015 overall economic growth was 1.2% (2014: +4.2 year-on-year).
The principal drag on growth in the nine months up to September was the external sector, while growth in private consumption was subdued, increasing just 1.0% annually in the January–September period as household spending patterns continued to adapt to a slowdown in inflation and credit conditions, given high interest rates. Meanwhile, a new environment of higher oil and gas prices prompted a mild improvement in government spending—mainly in infrastructure—and gross fixed investment.
On the external front, exports of goods and services decreased 5.2% year-on-year between January and September, which was nonetheless better than the contractions of 8.6% in the first half of 2016 and 8.2% in the January–September 2015 period. Moreover, imports contracted 2.1% in the nine months to September. Net exports continue to drag on the economy, subtracting 2.8 percentage points from overall economic growth in January–September 2016.
Following an expected slowdown in 2016, the government expects economic activity to pick up momentum and expand 1.9% in 2017 and 2.1% in 2018. The economy is expected to be supported by a recovery in oil production following the opening of the Kashagan oil field in Q4 2016. Kazakh officials expect Kashagan will only produce about 150 thousand barrels a day in 2017, while a company from the consortium is projecting output of between 350 and 370 thousand barrels a day. Also, a government stimulus program announced in 2016 will continue to support investment and the construction sector, helping to offset low bank lending.
Author: Ricardo Aceves, Senior Economist