16 August 2022, 13:20
At the Government session chaired by the Prime Minister of the Republic of Kazakhstan, Alikhan Smailov, the results of socio-economic development and the execution of the republican budget for January-July 2022 were considered. The Minister of National Economy Alibek Kuantyrov, the Minister of Finance Yerulan Zhamaubayev and the Deputy Chairman of the National Bank Akylzhan Baimagambetov reported on the topic.
According to the head of the Ministry of National Economy Kuantyrov, the growth rate of Kazakhstan's economy in January-July amounted to 3.3%. During the reporting period, high growth in the real sector, acceleration of growth in the services sector, maintaining a positive trade balance were observed by the main trends. Growth in the real sector amounted to 3.4%.
Business activity in services accelerated to 2.5% (January-June was 2.1%). Among the industries, construction (up 8.6%), information and communication (up 6.5%), trade (up 6.2%), transportation and warehousing (up 5.6%), manufacturing (up 4.9%), agriculture (up 2.1%), and mining (up 1.0%) showed positive growth.
The acceleration of the growth rate of investments in fixed assets up 4.5% (January-June was 2.6%). Investments grew in public administration and social security by 99.2%, education by 74.8%, trade by 26.4%, health by 26.3%, real estate by 19.9%, finance and insurance by 17.3% and construction by 14.8%.
In regional context the best rates are noted in Shymkent (growth of 28.6%) and Almaty (24.3%) Cities as well as Almaty region (14.9%) and Zhetysu region (14.4%). Reduction was recorded in Ulytau (by 35.3%) and Abay regions (by 12.9%), as well as in Atyrau region (by 5.9%) and Karaganda region (by 1.9%).
As for foreign trade, in the first six months of this year, trade turnover grew by 39.4% to $63.7 billion, including exports rose by 56.3% to $42.2 billion, with exports of processed goods increased by 33.5% to $12 billion. Imports of goods totaled $21.5 billion (growth of 14.8%). Overall, the positive trade balance was $20.8 billion.
Manufacturing industry maintains a positive growth rate. During January-July of this year, production grew by 4.9%.
"Positive growth was recorded in 17 regions. The largest increase is noted in East Kazakhstan and Kostanay regions, in Abay region, as well as in the cities of Almaty and Shymkent. In these regions there was an increase in production of food products, petroleum products, construction materials, medicines, non-ferrous metals, tractors, trucks and cars," the Minister of National Economy said.
According to him, there is a decrease in production in the region of Zhetysu (decrease by 7.5%), as well as in Pavlodar (3%) and Turkestan (0.2%) regions, mainly due to the reduction of production of flour, soft drinks, commercial concrete, uranium, metal, batteries, gasoline, diesel fuel, ferrochrome, unprocessed aluminum.
As for the processing industries, there was a 7.7% increase in machinery production, including 19.6% increase in automobile production, 13.8% increase in computer, electronic and optical equipment production, 2.8% increase in food production, 9.1% increase in drinks production, 5.3% increase in plastic products, 3.0% increase in finished metal products, 10.6% increase in chemical industry products and 5.5% increase in clothes production.
In the mining industry production increased by 1% (in January-June it was 1.9%). By sectors, production increased in mining industry by 18.7%, gas extraction by 2.2%, coal extraction by 1.3%, metallic ores by 0.9% and crude oil by 0.3%. In the extraction of other minerals there was a decrease of 6.6%.
During the period under review the volume of construction works increased by 8.6% (January-June to 9.2%). Positive growth was recorded in 17 regions. The greatest growth of construction and erection works has been noted in Almaty (by 29.6%) and Akmola (by 25.9%) regions, in Ulytau region (by 23.0%) as well as in Shymkent city (by 20.5%). Decrease in the volume of construction works has been observed in Mangystau region (decrease by 22,1%), and also in Abay region (by 18,9%) and Zhetysu region (by 10,8%).
In January-July of this year, 7.7 mln. sq. m of housing was commissioned, which is 0.8% less than in the same period of 2021. Positive growth was recorded in 14 regions. The highest indicators are observed in Turkestan (growth by 20.3%), Pavlodar (by 16.6%) and Kostanay (by 13.2%) regions, as well as in Shymkent city (by 15.0%).
Decrease is noted in Ulytau (decrease by 42.3%) and Zhetysu regions (by 3.9%), Mangistau region (by 20.7%), Atyrau region (by 8.7%), and also in Almaty city (by 13%) and Nur-Sultan city (by 0.7%).
In agriculture gross output increased by 2.1% (January-June 1.4%). Positive growth of production in the sector was recorded in 16 regions. Mangystau (growth by 13.9%), North-Kazakhstan (by 5.5%) and Zhambyl (by 4.9%) regions showed the largest growth. Decrease is observed in Kostanay region (decrease by 7.2%).
The overall situation in the regional context by 7 economic indicators is as follows. By all indicators positive growth is observed in 3 regions - in Shymkent city, as well as Karaganda and North-Kazakhstan regions.
For 6 indicators there is a growth in 8 regions. This includes the cities of Almaty and Nur-Sultan, as well as Almaty region, Kyzylorda region, East-Kazakhstan region, Pavlodar region, Akmola region and Aktobe region.
By 5 indicators positive growth is observed in 6 regions - Kostanay, Atyrau, Turkestan, Mangystau, Zhambyl and West Kazakhstan regions.
Positive growth by 4 indicators was recorded in Ulytau and Abay regions, by 3 indicators - in Zhetysu region.
The head of the department suggested the central and local executive bodies to focus on the following measures:
"The full implementation of the above measures will ensure the acceleration of the country's economic growth," Kuantyrov noted.
Akylzhan Baimagambetov, the Deputy Chairman of the National Bank of Kazakhstan, reported on the situation in the world and Kazakhstan. So, according to him, the global markets remain volatile on the background of continued growth in inflation, tightening monetary conditions in the world, fears of recession.
"Global business activity slowed to its lowest level in July, interrupting 25 months of consecutive growth, but remains in positive territory. Growth in production, orders and employment slowed in July. The slowdown was mostly concentrated in advanced economies. But emerging markets showed more resilience, where growth was close to a June high in 11.5 years," he reported.
Inflationary pressures around the world, according to business surveys, are gradually weakening. There has been a slight slowdown in the growth of raw material and cost prices. Nevertheless, the growth rates of cost prices and selling prices continue to show historically high values. In addition, the inflation forecast by international organizations is elevated and according to their expectations its level will remain elevated for a longer period.
"On July 26 this year the IMF for the second time revised downward its forecast for global economic growth from 3.6% to 3.2% this year due to the conflict in Ukraine, an unbalanced labor market and rising inflationary expectations. Despite the worsening of the global economy growth forecast, for Kazakhstan the IMF revised the GDP growth upward for this year from 2.3% to 2.9%. In general, the growth of developing economies will be higher than developed economies," Akylzhan Baimagambetov said.
The global inflation forecast is elevated due to food and energy prices and persisting imbalances between supply and demand. The IMF forecasts that global inflation will peak at 9% at the end of Q3 this year. Disinflationary monetary policy, as expected by the IMF, will have its impact in 2023.
According to IMF, rising prices continue to reduce living standards in the world and curbing inflation should be the first priority of governments and monetary authorities. Tightening monetary policy will inevitably come at an economic cost, but delaying it will only exacerbate it. Targeted fiscal support can mitigate the effects on the most vulnerable, but because government budgets are exhausted by the pandemic and a disinflationary overall macroeconomic policy focus is needed, such policies will need to be offset by reductions in government spending.
Kazakhstan's monthly inflation slowed to 1.1% in July from 1.6% the month before, although it was still high. The average monthly inflation rate in July over the last five years was 0.3%.
The slowdown in price growth was due to the seasonal depreciation of fruit and vegetable products. A more significant slowdown in consumer price growth was hindered by persistent demand in the economy amid the ongoing stimulative fiscal policy, pressure in the external and domestic sectors of the economy amid ongoing geopolitical tensions and the accompanying imbalances in the markets.
Against this background, the annual inflation rate for July rose from 14.5% to 15%. At the same time, rising food prices continue to make more than half of the contribution to inflation. Thus, food inflation accelerated from 19.2% to 19.7%, and non-food inflation, from 13.2% to 14.2%.
Inflation of paid services, despite relatively high monthly growth, remained unchanged at 9.2% due to the effect of the high base of 2021. Thus, inflationary pressure in the economy remains at a high level.
Given the acceleration of inflation and inflation expectations, their sustainability, fiscal demand stimulus and the external pro-inflationary backdrop, the National Bank raised the prime rate from 14% to 14.5% on July 25 this year. This will have a gradual effect on inflation over the next year.
The tenge weakened against the U.S. dollar by 1.5% to 477.07 tenge per U.S. dollar in July this year. Pressure on the exchange rate of the tenge, as well as the currencies of emerging markets, had an active tightening of monetary policy of the U.S. Federal Reserve System and the global strengthening of the U.S. dollar. Oil quotations fell below $100 per barrel amid concerns about prospects of the global economy.
Among internal factors - the period of vacations and dividend payments contributed to the seasonal increase in demand for foreign currency in summer months.
"In January-July of this year, the tenge was supported by sales of foreign currency proceeds by quasi-state sector entities, sales of currency to ensure transfers from the National Fund to the national budget and currency interventions of the National Bank of Kazakhstan. Concerns about an active increase in rates by the leading central banks of the world and the prospects for the global economy are factors in the volatility of the currencies of developing countries, including the tenge," the Deputy Chairman of the National Bank said.
According to the preliminary results of the first half of this year, the current account of the balance of payments was formed with a surplus of $6.6 billion. The trade surplus amounted to $21.6 billion, having increased by $12.5 billion due to the outpacing growth of exports of goods over imports. Nevertheless, imports of goods by balance of payments methodology rose by $2.9 billion, or nearly 16%, to $20.7 billion.
Foreign direct investor income increased by $2.8 billion, nearly 27%, to $13.5 billion.
The current account surplus remains volatile and is the result of high levels of world commodity prices, primarily oil.
Gross international reserves at the end of July this year amounted to $85.9 billion, including gold and foreign currency assets of the National Bank amounted to $32.8 billion, National Fund assets were $53.1 billion.
For allocation of transfers to the national budget at the amount of 3 trillion tenge for 7 months of this year, currency assets of the National Fund were sold at $3.3 billion. Against the background of a significant increase in oil prices, the income of the National Fund from the beginning of the year amounted to 3.4 trillion tenge, having increased almost 3.5 times to the same period last year. The average annual rate of return of the National Fund has amounted to 3.17% since the beginning of the year and 1.70% and 1.67%, respectively, for the last 5 and 10 years.
The pension assets of the UAPF by the end of July this year amounted to 13.7 trillion tenge, having increased by 609 billion tenge or 4.7% from the beginning of this year. The volume of investment income amounted to 519.5 bln tenge from the beginning of this year.
The yield of pension assets for the last 12 months amounted to 8.2%, the accumulated yield of pension assets for 5 years exceeded the cumulative inflation by 7.3 p.p.
Non-cash transactions of the population for 6 months of this year grew to 44.4 trillion tenge by 48%. The share of online payments exceeded 83%.
"The implementation of measures under the Digital tenge project is underway," Baimagambetov informed.
Yerulan Zhamaubayev reported on the performance of public finances for the first seven months of this year.
The state budget revenues (excluding transfers) amounted to 8 trillion 463 billion tenge. The republican budget revenues (excluding transfers) received about 5.6 trillion tenge. The plan was over-fulfilled by 72 billion tenge, of which taxes by 18 billion tenge and non-tax revenues by 54 billion tenge. The main amount of over-fulfillment in taxes accounted for VAT on domestic sales and export duties on crude oil.
"The over-fulfillment of the plan for VAT on sales of goods, works and services for the first six months of the year is due to an 18.4% increase in turnover compared to the same period last year," the Head of the Ministry of Finance said.
The plan for export duty on crude oil was overfulfilled due to the increase in the average world price of crude oil, as well as the weakening of the tenge against the U.S. dollar. The plan was not fulfilled by VAT on imports and import customs duties.
Revenues of local budgets were executed by 113.3% and amounted to 2 trillion 864 billion tenge. The plan was overfulfilled by 336 billion tenge, of which taxes by 318 billion tenge. Plans for revenues are over-fulfilled in all regions, except for Turkestan and Mangystau regions.
Expenses of the state budget are executed by 98.7 %, republican by 99.6 %, local budgets by 98 %. The republican budget expenditures amounted to 10 trillion tenge. Under-implementation amounted to 41 billion tenge, of which 10 billion tenge were savings. 31 billion tenge was not absorbed.
The largest amounts of underspending were in the Ministries of Education, Internal Affairs, Finance and Emergency Situations. The main reasons for under-utilization: the long procedure for entering into contracts, late submission of certificates of work performed and invoices, late submission of invoices for payment, payment was made for the actual volume of services provided, lack of need for expenditures in the reporting month.
Expenditures of local budgets amounted to 5.5 trillion tenge. 113 billion tenge are not used. In the current year regions are provided for targeted transfers in the amount of 3.3 trillion tenge. As of August 1, 1.6 trillion tenge was allocated for them; 97% of it was executed. Less than 48 billion tenge were not executed; among them there were 5 billion tenge of savings, and 43 billion tenge had not been utilized. The largest under-implementation was in Mangystau, Almaty, Aktobe and Karaganda regions. The main reasons for under-utilization: adjustments to design and estimate documentation, late submission of certificates of completed works, lengthy bidding procedures, late submission of invoices for payment to the treasury authorities.
"The desk audit covered more than 342 thousand procedures of public procurement worth about 7.3 trillion tenge in 7 months of this year. As a result of inspections, violations were found on 23,286 procedures, of which 93% of notifications on elimination of violations were executed by the objects of state audit," Zhamaubayev said.
1,485 auditing activities were carried out. The audit covered about 3.2 trillion tenge of budgetary funds. Financial violations of 244 billion tenge were identified. Violations were eliminated for 234 billion tenge by restoring the supply of goods, services and works, reimbursement to the budget and accounting records. 1,291 recommendations were given to improve and enhance the effectiveness of the audited entities.
The integrated privatization plan for 2021-2025 provides for realization of 721 objects (taking into account 51 objects envisaged for realization in the perimeter of parent companies). For the reporting period from the total number of 670 objects 229 objects were sold and transferred for trust management with the right of further purchase at the amount of 61 billion tenge. 68 objects are in the auction. 37 objects were sent for reorganization and liquidation. 131 objects are in pre-sale preparation. 205 objects are proposed for exclusion from Complex plan on decision of Commission on demonopolization of economics in order to prevent new private operators. These facilities provide socially important services in the regions without any alternative. At the same time the Comprehensive Plan of privatization will be supplemented with 171 objects, mainly of quasi-state sector.