Disruptions in the oil and gas industry and subdued consumer activity led to a slowdown in the economy of the Republic of Kazakhstan in 9M2022 to 2.8% yoy from 3.6% yoy in 1H2022 and 4.6% yoy in 1Q2022. Despite the acceleration of inflation and external uncertainty, fundamental conditions for the economic activity remain favorable so far. Continuing relatively high prices for hydrocarbons, stimulating budget support for the economy against the backdrop of expanding investment activity, and a close-to-record grain harvest are the main drivers of growth in the period. Due to continued geopolitical tensions, rising production costs and expansion of government spending, consumer inflation accelerated in September to 17.7% yoy, which is in line with the maximum figure achieved in the previous inflation acceleration cycle in 2015-2016. Amid accelerating inflation, the NBK raised the base rate by 50bp in July to 14.5%, while kept it at that level in September. In October, in view of further inflation growth to 18.8% yoy, the NBK raised the base rate to 16.0%.
Continued favorable pricing environment for energy products (~70% in the structure of exports in 9M2022) led to a 2.2-fold increase in the trade account surplus to $29.3 bn, which in turn led to an expansion of the current account surplus to $7.9 bn. the current account surplus was offset by an outflow from the financial account of $9 billion. Despite the favorable dynamics of external accounts, the tenge had depreciated by 10.5% YTD to 476.9 tenge per US dollar (depreciation by 2.5% qoq).
Macroeconomic dynamics in the Republic of Kazakhstan, according to our forecasts, will develop as follows: GDP growth rates this year will amount to 2.9% yoy, inflation dynamics will accelerate to 19%-20% yoy, and the exchange rate will be 480 tenge per 1 US dollar at the end of 2022.