Kazakhstan accelerates economic growth on the back of Russian and Western investments

The economic growth of Kazakhstan by the end of 2023 will be 4.8%, the IMF predicts. The IMF is pleased with the results of the fund mission’s visit to the country. The main conclusions are that despite general global instability, business activity in Kazakhstan grew, and inflation gradually decreased. Kazakhstan, as follows from the latest statements by the head of state, is ready for the economic reforms that the IMF recommends in its review of the country; moreover, some of them are already being implemented. Also, the IMF recommendations call for the country to draw closer to Western countries that compete with the Russian Federation for influence over Kazakhstan – Astana, on the other hand, rather intends to take advantage of the benefits of its “middle” position between the West and the East.

The IMF has completed an audit of the state of the economy of Kazakhstan (regular missions of the fund, we recall, are carried out in all IMF member countries) – a document with preliminary conclusions and recommendations was published on the organization’s website, its full version will be available in February 2024. According to the fund’s forecasts, Kazakhstan’s GDP growth in 2023 will be 4.8% (previous estimate – 4.6%). In 2024, growth rates will be more moderate (3–3.5%) due to lower oil production forecasts (see Kommersant on August 15). However, the fund admits that the forecast may soon be improved – much depends on how quickly the authorities carry out structural economic reforms.

The economic policy of Kazakhstan is approved by the fund – most of the theses of the document repeat almost verbatim the September keynote speech of the head of state Kassym-Jomart Tokayev, “The Economic Course of a Fair Kazakhstan.” Both the IMF recommendations and the president’s plans are built around reorienting the country from dependence on extractive industries to developing the manufacturing sector. To achieve this, among other things, the authorities, as advised by the fund, are going to increase the attractiveness of the economy for large investors. The IMF also supports the plans of the government of Kazakhstan to prepare a new Tax Code – in particular, an increase in the VAT rate from 12% to 16%, the introduction of a progressive scale of income tax and the elimination of some tax benefits.

The monetary policy (MCP), still pursued by the country’s national bank, is also recognized by the IMF as competent: although the inflation target (5%) has not yet been achieved, the indicator has decreased from a peak of 21% in February to 11% in September 2023 . We note, however, that the strict monetary policy, which ensured a reduction in inflation, was not supported by Mr. Tokayev: it was for this reason that he replaced the head of the regulator in September (an analysis of the actions of the new head of the Central Bank, Timur Suleimenov, is not provided in the IMF review). ACRA agency experts predict that the downward trend in inflation will continue – it is expected that by the end of 2024 it will slow down to 7–8%.

In addition to economic recommendations, the IMF review also contains a standard set of theses for a document of this format on the importance of increasing transparency and openness of the economy and reducing the influence of authorities on the market. As a rule, such proposals look formal, but in the context of Kazakhstan’s prospects they do not seem so. Let us recall that since the beginning of the military operation in Ukraine, competition for close cooperation with the country between the Russian Federation and Western countries, especially the European Union, has only intensified (see, for example, Kommersant on June 6).

The fact that they are not yet planning to choose a key partner in Kazakhstan can be evidenced by the statements of Kassym-Jomart Tokayev at the same September speech before parliament. According to him, the government, when pursuing economic policy, should focus mainly on the interests of national business, “now many countries are actively applying measures to protect the domestic market. Even developed countries have switched to protectionist industrial policies.” So far, the goals of the Kazakh authorities are largely met by balancing between the two sides, rather than choosing one.

Kristina Borovikova