Департамент торговых идей

As a result of quarantine and the recession in the economy, the retail sector in April and May lost about a third of the total turnover from the pre-crisis level. Despite a sharp increase in May, according to the results of the current year, it is expected that the economic downturn will cause a significant reduction in the turnover of trade, and its negative dynamics will significantly outstrip the pace of economic decline in general.

Inflation in May slowed to 0.5% mom from 0.9% mom in the previous month. In annual terms, the price increase weakened slightly from 6.8% to 6.7%. The reduction in tariffs for housing and communal services and the cost of automobile fuel, initiated by the state agencies, which began in April, continued in May. Significant interference by government agencies in pricing in the consumer market can significantly reduce inflationary pressures this year, as a result of which price increases can be significantly lower than the level of 9-11% targeted by the government and the National Bank.

The research team of Halyk Finance, was recognized as the winner in the nomination “Overall Best Economic Forecaster of 2019” in Kazakhstan according to the results of a traditional annual study conducted by FocusEconomics, a reputable international provider of economic analysis and forecasts (https://www.focus-economics.com/about-us/best-economic-forecasters-awards).

A sharp deterioration in the economic situation at the beginning of this year led to a negative development of the situation in the budget sphere. Against the background of weak growth of revenues by 1% and an increase in expenditures by 15% yoy, the State budget deficit excluding the transfer of the National Fund sharply increased to 8.5% of GDP in 1Q2020 compared with 6.7% of GDP in 1Q2019. At the same time, taking into account the transfer from the National Fund, the State budget deficit amounted to only T35 billion (0.2% of GDP). April budget data show a deep decline in revenue: income from CIT for the month fell by 94.3% yoy, and for VAT, PIT and taxes on international trade – by more than 60% yoy. We believe that in the second half of the year, as tax holidays and other fiscal easing are over, while the situation in the global commodity markets turn positive, the economy will begin to improve, which will lead to an increase in the State budget revenues.

In 1Q2020, the company produced 2.1 million pounds (lbs) of uranium, 13% lower than in 1Q2019. Sales volumes increased by 25% yoy to 6 million pounds (lbs). The fuel services segment showed a 3% yoy decrease in production volume.

Inflation in April increased by 0.9% mom, unchanged from the previous month. In annual terms, it increased from 6.4% to 6.8%, which corresponds to the level of the beginning of 2018. At the same time, it should be borne in mind that quarantine measures in connection with coronavirus, as well as limited nominal wage growth below 3% this year amid a recession in the economy will act as a strong disinflation factor.

February inflation slowed to 0.6% from 0.7% in the previous month, meanwhile in annual terms there is an increase from 5.6% to 6%. As we expected gradual “unfreezing” of tariffs for housing and communal services is the main driver of price growth – housing and communal services grew by 0.9% against a decrease of 4% a year earlier, the cost of gasoline increased by 5%, against a decrease of 2.6%, respectively.

The economy reached a new level of growth that was facilitated by budget expenditures that increased to 20.4% of GDP and high investment activity. At the same time, the quality of economic growth is without improvement – structural changes are not visible, salaries were temporarily raised due to the budget, expenses mainly financed current needs (75% of total expenses), while the state budget deficit in 2019 widened to -1.9% of GDP from -1.3% a year earlier.

The company produced 9 million pounds of uranium that is 2% lower than last year. The company managed to achieve the planned production volumes for 2019. The ongoing planned shutdown of production at the McArthur River mine supports uranium market prices, reducing supply by approximately 18 million pounds of uranium (on a 100% basis) per year. The fuel services segment showed an increase in production by 27% yoy and amounted to 13.3 million kgU compared to 10.5 million kgU in 2018.

Large-scale budget injections, together with a significant increase in investments, brought the economy to a new level of growth of 4.5% in 2019, which turned out to be higher than the average dynamics of 4.2% over the past decade. A set of targeted incentive and administrative measures supported domestic demand, offsetting the negative impact of negative global oil market conditions, while inflation remained at a moderate level of 5.4%, which is significantly lower than the long-term trend. In the basic version of the forecast for 2020, we expect GDP growth of 4.5%, inflation of 5.5% and a weakening of the national currency by 4% by the end of the year.