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CONSENSUS FORECAST Kazakhstan • July 2015

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CONSENSUS FORECAST Kazakhstan • July 2015 CONSENSUS FORECAST Kazakhstan • July 2015 KAZAKHSTAN 2 CALENDAR 16 NOTES 18 PUBLICATION DATE 7 July 2015 FORECASTS COLLECTED 30 June - 6 July 2015 INFORMATION AVAILABLE Up to and including 6 July 2015 NEXT EDITION 4 August 2015 Contributors ARNE POHLMAN OLGA COSCODAN ANGELA BOUZANIS Chief Economist Economist Economist ARMANDO CICCARELLI CARL KELLY ROBERT HILL Head of Research Economist Economist RICARDO ACEVES TERESA KERSTING ERIC DENIS Senior Economist Economist Economist RICARD TORNÉ DIRINA MANÇELLARI MIRIAM DOWD Senior Economist Economist Editor FOCUSECONOMICS Kazakhstan July 2015 Kazakhstan Kazakhstan Outlook deteriorates Lackluster GDP growth in Q1 resulted from a slowdown in the agricultural and services sectors. Conversely, the industrial sector, buttressed by an increase in both the manufacturing and construction sectors, showed a notable improvement in Q1. Although the recession in Russia deepened in Q2, more recent data suggest that the Kazakh economy was more resilient at the outset of Q2. The short-term economic outlook, however, remains weak. The worsening of the crisis in Russia, together with LONG-TERM TRENDS | 3-year averages elevated perception of political risk and uncertainty over monetary and exchange rate policies, are likely to dampen bank lending and investment 2011-13 2014-16 2017-19 Population (million): 16.9 17.7 18.5 in the second half of the year. GDP (USD bn): 205 210 246 GDP per capita (USD): 12,126 11,858 13,267 GDP growth (%): 6.2 2.9 4.5 The government’s plan aimed at improving the country’s business and Fiscal Balance (% of GDP): -2.3 -2.7 -1.8 investment climate is expected to ramp up economic growth in the long Public Debt (% of GDP) 12.3 16.2 21.3 Inflation (%): 6.0 6.5 5.9 run. However, the current recession in Russia and oil prices that are lower Current Account (% of GDP): 2.1 -0.7 0.1 than a year ago will weigh on the country’s investment and export revenues External Debt (% of GDP): 67.0 76.8 78.9 this year. FocusEconomics panelists expect the economy to expand 1.4% in 2015, which is down 0.4 percentage points from last month’s forecast. For 2016, our panel of experts sees economic growth picking up to 2.9%. Inflationary pressures are fading. Inflation fell from 4.3% in May to 3.9% in June, which marked the lowest level in over a decade. The FocusEconomics panel expects inflation to end 2015 at 5.9%, which is down 0.6 percentage points from last month’s forecasts. For 2016, the panel expects inflation of 6.3%. REAL SECTOR | Economic growth slows down in Q1 Ricardo Aceves Senior Economist Kazakhstan’s economy weakened at the beginning of the year. GDP expanded 2.3% annually in the first quarter of 2015, which marked a slowdown over the 3.8% increase registered in the same quarter last year. Kazakhstan reports growth at an accumulated basis and in the full year 2014 overall economic GDP | variation in % growth was 4.3% (2013: +6.0 year-on-year). 9.0 The print reflected that the agricultural sector grew 2.9% annually in Q1 2015, which was below the 3.5% increase observed in Q1 2014. In addition, 6.0 services lost strength and expanded 3.7% year-on-year in Q1 2015 (Q1 2014: +5.4% yoy). Conversely, the industrial sector improved and increased 1.1% % in Q1 2015, which contrasted the 1.1% contraction registered in the same 3.0 quarter last year. Growth in the industrial sector bounced back in the first three months of this year, stemming from a notable increase in the manufacturing sector and growth in construction. 0.0 Q2 11 Q2 12 Q2 13 Q2 14 Q2 15 President Nursultan Nazarbayev was inaugurated for another new five-year Note: Year-on-year changes of GDP in %. Source: Statistics Agency of the Republic of Kazakhstan (SARK) and term on 30 April, following his landslide victory in the 26 April presidential FocusEconomics Consensus Forecast. elections. President Nazarbayev pledged to use this new term to carry out economic reforms in order to modernize the economy, propel economic growth and improve transparency and accountability in the public sector. FocusEconomics Consensus Forecast | 2 FOCUSECONOMICS Kazakhstan July 2015 On 6 May, Nazarbayev presented a 100-step program in which he outlines the reforms that he wants to implement in order to deliver the five-pillared manifesto promises he pledged during his campaign. The Ministry of National Economy foresees economic growth of 1.5% in 2015, under a baseline scenario in which the Ministry projects the price-per- barrel of oil to average USD 50. Under a more optimistic scenario, in which the Ministry projects oil prices to average USD 60 per barrel, government authorities expect the economy to increase 2.0%. Analysts see Kazakhstan’s economy rising 1.4% in 2015. This month’s projection is down 0.4 percentage points from last month’s estimate. For 2016, the panel of analysts expect the economy to pick up pace and expand 2.9%. REAL SECTOR | Industrial production rebounds in May Industrial Production | annual variation in % 4.0 Kazakhstan’s industrial output rebounded in May and increased 1.1% over the same month last year. The reading bounced back from the 0.4% contraction registered in April and marked the fastest pace of expansion in the last three 2.0 months. % 0.0 The monthly expansion stemmed from a notable increase in mining and quarrying. Conversely, manufacturing output contracted over the previous -2.0 month, as well as electricity generation and water supply. Year-on-year Annual average -4.0 The overall trend remained stable in May. The annual average growth in May-13 Nov-13 May-14 Nov-14 May-15 industrial production remained unchanged at April’s 0.3% in May. Note: Year-on-year and annual average variation of industrial production index in %. Source: Statistics Agency of the Republic of Kazakhstan (SARK) and A group of analysts surveyed by FocusEconomics expect that industrial FocusEconomics calculations. production will contract 0.3% in 2015, which is up 0.5 percentage points from last month’s survey. For 2016, the panel sees that industrial production will rebound and expand 1.7%. MONETARY SECTOR | Inflation falls to lowest level in over a decade In June, consumer prices fell 0.1% over the previous month, which contrasted Inflation | Consumer Price Index the 0.3% increase observed in May. June’s drop, which was the first one since August 2002, reflected lower prices for food, housing, energy and education. 2.0 8.0 1.5 7.0 Inflation fell from 4.3% in May to 3.9% in June, which marked the lowest level in 16 years. 1.0 6.0 % % As inflationary pressures are fading, the inflation trend continues the downward 0.5 5.0 trajectory in place since December 2014. Annual average inflation fell from 6.5% in May to 6.3% in June. 0.0 4.0 Month-on-month (left scale) Year-on-year (right scale) -0.5 3.0 The National Bank of Kazakhstan expects that, notwithstanding the two Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 scenarios projected by the Ministry of National Economy, inflation will remain Note: Month-on-month and year-on-year variation in consumer price index in %. within its target range of between 6.0% and 8.0% in 2015. FocusEconomics Source: Statistics Agency of the Republic of Kazakhstan (SARK). panelists expect inflation to end 2015 at 5.9%, which is down 0.6 percentage points over the previous month’s forecast. At the end of 2016, the Central Banks expects inflation to rise to 6.3%. FocusEconomics Consensus Forecast | 3 FOCUSECONOMICS Kazakhstan July 2015 Economic Indicators | 2010 - 2019 Annual Data 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Real Sector Population (million) 16.4 16.7 16.9 17.2 17.4 17.7 17.9 18.2 18.5 18.8 GDP per capita (USD) 9,008 11,136 11,928 13,314 12,175 12,003 11,396 12,137 13,222 14,442 GDP (USD bn) 148 186 202 229 212 212 205 221 244 271 GDP per capita (EUR) 6,715 8,579 9,047 9,662 10,062 10,964 10,726 11,129 11,742 12,379 GDP (EUR bn) 110 143 153 166 175 194 193 203 217 232 GDP (KZT bn) 21,816 27,572 30,347 35,275 38,712 41,463 45,021 49,517 54,691 60,668 Economic Growth (Nominal GDP, ann. var. in %) 28.3 26.4 10.1 16.2 9.7 7.1 8.6 10.0 10.4 10.9 Economic Growth (GDP, annual var. in %) 7.3 7.5 5.0 6.0 4.3 1.4 2.9 3.8 4.5 5.1 Private Consumption (annual var. in %) 11.8 10.9 11.0 12.6 -2.3 1.0 4.0 4.5 4.9 5.4 Government Consumption (annual var. in %) 2.7 11.3 13.2 1.7 10.3 - - - - - Fixed Investment (annual var. in %) 3.8 3.9 9.1 4.9 0.2 2.3 3.2 4.3 4.8 5.4 Industrial Production (annual var. in %) 9.7 3.6 0.6 2.3 0.2 -0.3 1.7 2.6 3.2 3.7 Unemployment (% of active population, aop) 5.8 5.4 5.3 5.2 5.0 5.3 5.3 5.3 5.2 5.2 Fiscal Balance (% of GDP) -2.4 -2.1 -2.9 -2.0 -2.8 -2.8 -2.4 -2.1 -1.8 -1.6 Public Debt (% of GDP) 14.4 11.9 12.6 12.6 14.6 16.5 17.5 19.5 21.3 23.1 Monetary and Financial Sector Money (ann.
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