During the first 5 months of this year, the economy of Kazakhstan evinced high growth rate of 4.6% yoy amidst a favorable commodity price environment in the global markets. However, due to the planned shutdown of production at the Kashagan field in June, economy slowed a bit down that month and it reflected in the 6-month GDP growth rate which decelerated to 3.4% yoy (4.6% yoy in 1Q2022). Economic growth and a strong increase in the foreign trade surplus contributed to the improvement of budget parameters and the growth in state support for the economy, which mitigated the negative impact of external factors. External pro-inflationary pressure on the economy as a consequence of the conflict between the Russian Federation and Ukraine contributed to the acceleration of consumer price inflation in June to its maximum level since 2016 – 14.5% yoy. The expansion of fiscal impulse and credit to the economy led to an acceleration in inflation, both on aggregate demand side and the aggregate supply side of the economy as well. Amidst accelerating inflation, the NBK hiked the base rate in 2Q2022 by 50 bp to 14.5%. Since the prices went up on the major setup of the Kazakh exports in 1H2022, trade account surplus at $21.6 billion (the highest in the last 8-year) led to the widening of the current account surplus to $6.6 billion. Despite the contraction of demand for foreign currency and a significant surplus of external balances the tenge weakened by 7.7% YTD and stood at 465.1 per US dollar at the end of 2Q2022 (1.5% qoq).
Geopolitical tensions, global acceleration of consumer price inflation and monetary tightening in the second half of this year will affect the economy of Kazakhstan. We forecast GDP growth this year at the level of 3.3%, CPI rate at 15.0%-16.0% and the FX rate of 475 tenge per 1 US dollar as of the end of 2022.