Kazakhstan's growth rate stands at 2.5% in January-October

At a regular Government meeting chaired by Prime Minister Alikhan Smailov the results of socio-economic development of Kazakhstan for 10 months of this year were considered. The Deputy Prime Minister, Minister of Finance Yerulan Zhamaubayev, Minister of National Economy Alibek Kuantyrov, and Deputy Chairman of the National Bank Berik Sholpankulov made reports on this topic.

Minister of National Economy Kuantyrov informed that Kazakhstan's economy grew by 2.5% in January-October. Growth in the real sector amounted to 2.8%, while in services sector it was 1.6%. Among the sectors, agriculture, information and communication, construction, manufacturing, trade, transport and warehousing showed positive growth. 

The growth rate of investment in fixed assets was 6.7%. By main branches of the economy, the inflow of investments increased in industry by 4.1%, including in mining by 13.7%, in agriculture by 7.4%, in real estate by 14.7%, in transport and storage by 8.5%.

In regional context, the best indicators are observed in Kyzylorda, East and West Kazakhstan regions, as well as in the cities of Almaty and Shymkent.

In January-September this year, foreign trade turnover grew by 35% to $98.4bn, including exports up 47.5% to $63.8bn, with exports of processed goods up 37.5% to $19.3bn and imports up $34.6bn, with an overall positive trade balance of $29.3bn.

"The manufacturing industry maintains a positive growth rate. During January-October of this year the production volume increased by 4.3%. Positive growth was recorded in 16 regions. The largest increase is noted in Zhambyl, Kostanay and East Kazakhstan regions, as well as in Almaty city," Kuantyrov said.  

Machine building output grew 7.7%. In particular, automotive industry increased by 18.3%, while production of electrical equipment grew by 12.4%.

The following industries also showed growth: chemical products production grew by 10.6%, light industry by 7.8%, drinks by 8.9%, plastic products by 4%, oil refinery products by 3.7% and food by 3.5%.

In the mining industry production decreased by 1%. In terms of branches, production increased in mining services by 17.8%, coal by 1.6% and metal ores by 0.6%. Gas extraction decreased by 1.5%, oil extraction by 2.5% and other minerals extraction by 9.9%. In the marked period the volume of the executed construction works has increased by 5%.

Positive growth has been recorded in 17 regions. The largest growth of construction and installation works is noted in Shymkent city, as well as Akmola, Kyzylorda and Almaty regions.

In January-October this year, 11.7 mln. sq. m of housing was commissioned, which is 1.1 % more than in the same period of 2021. Positive growth was recorded in 15 regions. The highest indicators are observed in Turkestan, Akmola and Almaty regions, as well as in Shymkent city. Decrease was observed in Ulytau and Abay regions, Mangistau and Atyrau regions, as well as in Astana city.

In agriculture, gross output increased by 8.2%. Positive growth of production in the industry was recorded in 16 regions. The largest growth was shown by Kostanay, Akmola, Mangystau and North-Kazakhstan regions.

According to the head of the Ministry of National Economy, the overall situation in the regional context by 7 economic indicators is as follows:

For all indicators, positive growth is observed in 7 regions, such as Kostanay, Akmola, Zhambyl, East Kazakhstan, Kyzylorda regions, as well as in the cities of Almaty and Shymkent.

Central and local executive bodies are invited to focus on the following measures.

Strengthening the monitoring of price dynamics for socially important food products and taking comprehensive measures to ensure their affordability;

Carrying out targeted work with investors with coordination at all levels to support them;

Develop measures to meet industry targets and promptly assist in resolving potential problems;

Promote available support measures for exporters to ensure that planned volumes of domestically produced goods are achieved;

Timely response to business needs and maintenance of favourable conditions for its activities.

As emphasized by Deputy Chairman of the National Bank Berik Sholpankulov, the situation in global markets in October this year remained volatile. Global business activity continued to decline for the third consecutive month in October, at 49. This is the lowest figure since June 2020. Global output fell in both manufacturing and service sectors.

In Kazakhstan, however, the Business Activity Index continued to recover for the second month in a row in October. The index rose to 49.1, up from 48.2 in September. Recovery of business activity was observed in all sectors, except manufacturing, where the index remained almost at the level of the previous month.

For the first time in the last 5 months, businesses evaluated the current business environment positively. Businesses estimated that demand for finished goods has improved. Estimates of future business conditions for the next 6 months have also improved.

High geopolitical and market volatility and elevated inflationary pressures are negatively affecting global business prospects.

Despite a slight slowdown in monthly inflation to 1.6% m/m in October after a significant increase of 1.8% m/m a month earlier, it is still well above the annual average of 0.7% in October over the last 5 years.

On a year-on-year basis, inflation reached 18.8%. The biggest contributor continues to be food prices, which reached 23.1% year-on-year. The seasonal cheapening of fruit and vegetable products came to an end.

"Non-food inflation also accelerated to 17.9%. There was an acceleration of price growth for goods with a high share of imports, including personal goods, household appliances, construction materials and medicines. At the same time, in the structure of non-food products there is a slowdown in price growth for fuels and lubricants and cars as a result of withdrawal from the high base of last year," Sholpankulov said.   

Inflation in paid services reached 13.5%. Housing rents continued to rise, and the cost of electricity rose due to higher tariffs from energy producing companies.

In October, the median estimates of expected and perceived inflation rose sharply to 18.3% and 22%, respectively. Both indicators reached their highest levels since 2016.

Rising inflationary pressures on the back of high inflation expectations, fiscal stimulus calls for a continuation of disinflationary monetary policy.

The tenge appreciated by 1.7% against the US dollar to 468.2 tenge per US dollar in October this year.

Increase in foreign exchange earnings of domestic producers has a favorable impact on Tenge exchange rate, flexible exchange rate formation increases the balance of the currency market.

Flexible exchange rate formation contributes to the efficiency of the currency market and preservation of international reserves.

According to preliminary results of 9 months of this year, current account of balance of payments was in surplus and amounted to $7.9bn due to improvement of trade balance.

The trade surplus amounted to $29.3bn, an increase of $15.9bn over the same period last year.

"Income of foreign direct investors amounted to $20.2bn, an increase of $3.7bn. Gross international reserves for October increased by $1bn to $85.4bn. Gold and foreign currency reserves last month increased by 1% to $33bn and allow to cover about 7.1 months of imports," B. Sholpankulov informed.  

National Fund assets increased last month by 1.5%, to $52.4 billion. Since the beginning of the year there has been a 5.3% decline against the background of excess of use of funds over receipts into the fund.

In order to allocate KZT4 trillion in transfers to the national budget, $3.8bn worth of foreign currency assets have been sold since the beginning of the year.

Against the background of rhetoric of central banks of developed countries on tightening of monetary policy, bond and equity markets showed a strong decline since the beginning of the year. However, in October, the equity market grew by 7.21%, as a result of which the National Fund assets grew by $851m in October.

The pension assets of the SAPF at the end of October amounted to 14.1 trillion tenge, having increased by 1.1 trillion tenge, or 8.3%, YTD. The volume of investment income amounted to 672.5 billion tenge from the beginning of the year, pension contributions - 1,379.3 billion tenge, pension payments amounted to 218.2 billion tenge, early withdrawals stood at 868.9 billion tenge.

In his turn Deputy Prime Minister, Minister of Finance Yerulan Zhamaubayev said that according to the results of 10 months of this year there are the following indicators of execution of public finances.

The state budget received revenues amounting to 12 trillion 427 billion tenge or 104% of plan.  

Republican budget revenues amounted to about 8.4 trillion tenge or plan was fulfilled by 102%. 

The plan was overfulfilled by 179 billion tenge including taxes by 89 billion tenge and non-tax revenues by 90 billion tenge.

The main amount of over-fulfilment in taxes is in VAT.

Factors contributing to the over-fulfilment are: 

increase in turnover on sale of goods, works and services by 26% compared to the same period last year;

reduction of VAT refund by 19%;

increase in volume of imports from third countries by 29%.

The plan was not fulfilled for import customs duties, corporate income tax (CIT) and export customs duty (ECD) on crude oil. Non-fulfillment of the plan on CIT is related to 33% decrease in the amount of declared advance payments for 10 months of 2022 for 615 large taxpayers compared to the same period of the last year.

Failure to execute the plan for ECD on crude oil is due to a decrease in the actual ECD rate from the forecast and changes in the exchange rate of tenge to the US dollar.

Revenues of local budgets were executed by 108.5% and amounted to 4 trillion tenge. The plan was overfulfilled by 316 billion tenge, including 274 billion tenge in taxes.

Revenue plans have been exceeded in all regions, except for Mangystau region.

State budget expenditures have been executed by 96.7%, national budget expenditures by 98% and local budgets by 94%.

The republican budget expenditures amounted to 14.5 trillion tenge. The deficit was 295 billion tenge, of which 17 billion tenge were savings. 

Undisbursed amounted to 278 billion tenge. The Ministries of Industry and Infrastructural Development, Internal Affairs, Emergency Situations and Education accounted for the largest amounts of undisbursed funds.

The main reasons for non-implementation are technical problems in treasury information systems, lengthy tender procedures, late submission of certificates of completed works, invoices, lengthy procedures for conclusion of contracts, supplementary agreements, etc.

Expenditures of local budgets amounted to 8.1 trillion tenge. Not executed amounted to 520 billion tenge.

This year regions are provided for targeted transfers in the amount of 3.3 trillion tenge. As of November 1, they were allocated 2.6 trillion tenges. Of these, 94% have been absorbed. It is 150 billion tenge, including savings of 16 billion tenge and 134 billion tenge, which have not been utilized.

The largest under-utilization was in the following regions: Astana city, Mangystau, West-Kazakhstan and Aktobe regions.

According to Zhamaubayev, the main reasons for non-implementation are adjustments in design and estimate documentation, late submission of certificates of completed works, prolonged tender procedures, late submission of invoices for payment to the treasury authorities.

Recently, it has been observed that state agencies submit financial documents on budget execution on the last working day of the month.

For technical reasons, there is a high risk of delayed processing by the territorial treasury. Therefore, central and local government agencies need to work on the uniform submission of financial documents to the territorial treasury bodies and not to leave the payments on the last day of the month.

For 10 months of this year cameral control covered more than 475 thousand procedures for public procurement in the amount of about 10 trillion tenge.

As a result of inspections, violations were identified in 32,957 procedures, of which 93% of the notifications on elimination of violations were executed by the state audit objects.

Approximately 2,000 audits were conducted. Approximately 3.7 trillion tenge of budget funds were audited. 

Financial irregularities amounting to 304 billion tenge were identified. Violations were eliminated in the amount of 284 billion tenge by restoring the supply of goods, services and works, reimbursement to the budget and accounting records.

1,800 recommendations were given to improve and enhance the performance of the audited entities.

The Comprehensive Privatisation Plan 2021-2025 provides for the sale of 675 objects.

During the reporting period, 245 objects were sold and transferred for trust management with the right to subsequent redemption in the amount of 57 billion tenge. 48 objects are under auctions. 52 objects were sent for reorganization and liquidation. 330 objects are in pre-sale preparation. These are the results of execution of public finances for the reporting period.

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