Since the beginning of the year, domestic trade (wholesale and retail) that grew 7.3% yoy (+ 2.4% yoy 4M2017, + 6.2% yoy 4M2018), transportation by 4.8% yoy (+ 3.5% 4M2017, 4.6% yoy 4M2018) and agriculture by 3.6% yoy (+2,9% 4M2017, + 3.8% yoy 4M2018) contributed the most to the STEI. Industrial production grew 2.9% yoy and as compared with 4M2017 (+ 7.1% yoy) and 4M2018 (+ 5.1% yoy) remains the lowest metrics in the last three years. Construction in January-April 2019 shadowed all other components of STEI with 8.4% yoy (+6.1% yoy 4M2017, + 2.1% yoy 4M2018). Telecommunication sector in January-Aprilof this year made 0.5% yoy (+ 2.0% yoy 4M2017, + 6.9% yoy 4M2018).
According to the Committee on Statistics of the Ministry of National Economy of Kazakhstan (the CS MNE), in January- April 2019, industrial output amounted to T9.294bn in current prices, which is 2.9% yoy than in the same period last year. According to our estimation, industrial production contributed 1.41pp and shared 48.7% of growth.
In mining and quarrying of Kazakhstan, output in January-April 2019 increased by 2.6% yoy (+ 4.9% yoy in January-April 2018). Crude oil output in January-April 2019 made -1.1% yoy (+ 5.9% yoy in January- April 2018). According to the CS MNE, crude oil and natural gas output in January-April 2019 accounted for 25 349 thousand tons (25 399.8 thousand tons in January-April 2018), which is 28.5% of the targeted output for 2019 (89.0 million tons the latest target of the Ministry of Energy of the Republic of Kazakhstan). In mining of metal ores, there is a multidirectional growth trend depending on metal ore type. Thus, non-ferrous ores mining reached 17.2% yoy (+2.1% yoy in January-April 2018), while iron ore output made -4.3% yoy (+3.9% yoy in January-April 2018).
Crude oil and natural gas contribution to STEI, according to our calculations, in January-April 2019 was negative and amounted to -0.25pp. Commodity sector contribution to the STEI, including taking into account the transportation and sales of commodity sector products, was 2.72pp, which is about 66% growth.
Manufacturing in the reporting period of 2019 made 3.5% yoy. (+ 5.9% yoy in January-April 2018). In manufacturing, light industry with 27.4% yoy (+2.1% yoy in January-April 2018), beverage production 22% yoy (+ 8.2% yoy in January-Apri l2018), plastic products production industry 17.8% yoy (+ 8.5% yoy in January-April 2018) demonstrated two-digit increase in production in the period. Metallurgy showed a negative growth of -1.5% yoy in the period (+4.1% yoy in January-April2018). Ferrous metallurgy accounted for -11.2% in January-April 2019 (+ 6.1% yoy in January-April 2018).
Domestic trade made 7.3% yoy in January-April of 2019 with retail sales of 5.3% yoy (+ 5.4% yoy in January-April 2018), and wholesale 8.0% yoy (+ 6.8% yoy in January-April 2018). According to our calculations, trade contributed to the STEI 1.67pp in January-April 2019. The share of commodity sector in domestic trade (including wholesale and retail trade in oil and oil products, metals and products from them), according to our current estimate, is at least 70% of the total.
Transportation ensured a 0.62pp increase in the STEI in January-April 2019 and amounted to 4.8% yoy (4.6% yoy January-April 2018). Positive dynamics of freight turnover was in air transportation 55.3% yoy, in automobile transportation 15.0% yoy. Railroad and maritime freight evidenced decline at 1.4% yoy and 86.8% yoy. In transportation by pipelines, freight turnover decreased 5.8 yoy. Transportation of commodity sector products by all modes of transport, according to our estimates, is at least 75% of the total cargo transportation.
Gross output of agriculture in January-April 2019 made 3.6% yoy (+3.8% yoy in January-April 2018). Cattle breeding output increased by 3.7% yoy. Contribution of agriculture to the STEI in January-April2019 amounted to 0.12pp.
Construction sector grew in January-April 2019 was 8.4% yoy (2.1% yoy January-April 2018). The contribution of construction to the STEI in the analyzed period was 0.28pp.
Telecommunication contributed the least to the STEI and made 0.01pp in January-April of the current year, evidencing the growth rate of 0.5% yoy (+ 6.9% yoy January-April 2018).
Fixed assets investments in January-April 2019, according to the preliminary data of the CS MNE, was 6.7% yoy (+ 28.9% yoy in 4M2018). In nominal terms, investments in fixed assets reached T2.914bn within the analyzed period.
Our opinion
In January-April of this year, there is a slight decrease in the share of the commodity sector in the growth dynamics of the STEI. A negative growth in coal and lignite production by 3.6% yoy, crude oil and natural gas production by 1.1% yoy, and iron ore production by 4.3% yoy contributed to the reduction of the raw materials sector in the economy growth in the period. The reduction in coal and lignite mining resulted from a reduction in its exports to the Russian Federation, as well as a reduction in domestic consumption. The reduction in mining and production of ferrous metallurgy products (steel and iron) is due to a technological accident at the enterprise of JSC ArcelorMittal Temirtau last year, as well as to carrying out technological work to remove the upper layers at the Lisakovskoye deposit in Kostanay region. Reduction in demand for ferrous metallurgy products from Iran, which began to increase its own production volumes and introduced restrictive import duties, also conditioned the slow-down of the industry. The reduction of oil and gas condensate production resulted from technical work planned for April of this year at the Kashagan field.
The observed growth of the economy of Kazakhstan is still below the figures for 2018-2017 and 66% of this growth in January-April 2019 is supported by the republic’s commodity sector. A noticeable increase in the manufacturing industries cannot provide a significant contribution to the overall growth of the economy, as the share of the commodity sector in the industry (mining and quarrying) remains high and accounts for 56.8% of the total industrial production and 27.7% in STEI. Have the mining and processing of metals as well as the production at the Kashagan field recovered, the oil output of which is planned to increase over 370,000 barrels per day, the share of commodity sector in the growth of the economy will return to 70% -75%, which is quite expected given the current structural imbalances in the economy.
In connection with the planned maintenance works at the Karachaganak in September and Tengiz oilfields in August – October of the current year, the predicted volume of oil production in the republic will be 89 million (90.3 million in 2018), which will affect the growth rates of the economy, which, according to our current forecast, it will be 3.6% yoy.
