10 November 2021, 12:00
At the government session chaired by the Prime Minister of Kazakhstan Askar Mamin, results of the socio-economic development and the implementation of the republican budget for January-October 2021 were considered. Minister of National Economy Aset Irgaliyev, Chair of the National Bank Erbolat Dossaev, Minister of Finance Yerulan Zhamaubayev reported on the development of the economy, monetary policy, execution of the republican budget, local content in public procurement.
In January-October 2021, economic growth in Kazakhstan amounted to 3.5%
As the Minister of National Economy Aset Irgaliyev noted, the growth of the economy of Kazakhstan in January-October 2021 amounted to 3.5%. During the reporting period, the main trends show an acceleration of growth dynamics in the service sector, the preservation of the manufacturing industry and construction as drivers of growth and stability of the economy, high dynamics of export growth and continued high investment activity in non-extractive industries.
“In January-October 2021, the growth in the real sector amounted to 2.9%. Business activity in the service sector rose to 3.4%. Among the industries, high growth rates are demonstrated by information and communications, trade, water supply, construction, power supply, manufacturing,” Irgaliyev reported.
Attraction of domestic and foreign investments remains an important factor of economic growth. At the same time, non-extractive industries remain an attractive area for investment.
“For 10 months of this year, the growth rate of investments in fixed assets amounted to 2.5%, including the growth dynamics of investments in fixed assets, excluding the mining industry, amounted to 14%. Thus, investments increased in construction by 2.2 times, manufacturing industry — by 78.6%, agriculture — by 41.9%, trade — by 31.4%, real estate transactions — by 17.4% and financial activities — by 12.1%. In the regional context, the best indicators are observed in the cities of Shymkent and Almaty, as well as in Aktobe and Pavlodar regions,” the Minister of National Economy explained.
In January-September 2021, foreign trade turnover amounted to $72.8 billion, including the export indicator amounted to $43.3 billion. At the same time, the export of processed goods increased by 25.5% to $14 billion. Imports of goods amounted to $29.5 billion.
In general, the positive trade balance increased compared to last month by $1.8 billion and amounted to $13.8 billion.
The manufacturing industry maintains a steady growth trend. In January-October of this year, the volume of production increased by 5.3%. 14 regions showed positive growth. The largest increase is noted in Almaty city, Almaty, Kostanay and Kyzylorda regions.
In the context of manufacturing industries, there was a dynamic growth in the production of pharmaceutical products by 33.6%, mechanical engineering products — by 19.5%, including the automotive industry — by 23.4%, the production of cars and locomotives — by 59%, building materials — by 9.3%, plastic products — 36.5%, finished metal products - 16.4%, clothes — 11.4% and furniture — 11.8%.
“The mining industry is seeing a positive growth zone. In the reporting period, the volume of production in the industry increased by 0.1%. In the context of subsectors, production in the extraction of metal ores increased by 4.1%, the provision of services in the mining industry — by 2.1%, coal mining — by 0.2%. Over the past 10 months, the volume of completed construction work has grown by 7.6% and the construction sector demonstrates high growth rates,” said the Minister of National Economy.
The positive growth of the indicator was recorded in 16 regions. The greatest growth in construction and installation work is noted in the Mangystau and Akmola regions, as well as in Almaty. On the whole, positive dynamics remain in terms of housing commissioning. For January-October of this year commissioned 11.6 million sq. m of housing. The growth of the indicator was 7.9%.
Positive dynamics was recorded in 15 regions, among which the highest rates are observed in the East Kazakhstan and Kostanay regions, as well as in the city of Shymkent.
As noted by Irgaliyev, in agriculture in the reporting period, a decrease in output by 2.3% was recorded. The lowest rates are observed in Kostanay and Akmola regions. The growth of production in the industry was recorded in 9 regions. The greatest growth was shown by Pavlodar and East Kazakhstan regions.
The general situation in the regional context for 7 economic indicators is as follows.
For all indicators, positive growth is noted in 4 regions — Almaty and Zhambyl regions, as well as in the cities of Nur-Sultan and Shymkent.
According to 6 indicators, growth is observed in 9 regions. This is the city of Almaty, as well as Akmola, Aktobe, Atyrau, East Kazakhstan, Kostanay, Mangystau, Pavlodar and Turkistan regions.
In addition, according to 5 indicators, positive growth is observed in 2 regions, Kyzylorda and East Kazakhstan regions. The lowest rates are observed in the Karaganda and West Kazakhstan regions.
Central and local executive bodies are encouraged to focus on the following measures.
The implementation of the above measures will accelerate economic growth in the country.
Annual inflation remained at the level of 8.9%, stopping growth for the first time in the last 6 months.
As the Chair of the National Bank Erbolat Dossaev informed, the recovery of the world economy is continuing, which is accompanied by the growth in inflation as a result of the imbalance in the offer and demand, high prices for raw materials and foodstuffs.
“The global inflationary background remains high. Both developed and developing countries record updates to multi-year highs. In September 2021, the inflation in the US rose to a record 5.4%, in the EU and the Russian Federation to 4.1% and 8.1% in October, respectively,” said Dossaev.
In China, the rise in producer prices, which is paid more attention to when making decisions on monetary policy, in September 2021 amounted to 10.7%.
According to the IMF, with the exhaustion of the remaining shocks in the short term, inflation in developed and developing countries will normalize by mid-2022. With more prolonged supply and demand imbalances, supply disruptions and rising commodity and food prices, the IMF estimates that inflation could stabilize until 2024.
In October 2021, world food prices continued to rise, reaching a 10-year high. The FAO index for the month increased by 3.9% and reached 133.2 points due to the rise in prices for vegetable oil, grain and dairy products.
The National Bank estimates that inflationary pressures will remain high throughout 2022 in developing countries, including Kazakhstan, given persisting imbalances and rising inflationary expectations.
According to the head of the financial regulator, financial market participants are setting longer inflationary expectations. The share of options in the United States, setting inflation in the next 5 years above 2%, is more than 80%, in the UK — 56%, in the Eurozone — 41%. Key rate futures and forwards are also priced with a higher likelihood of rate hikes in 2022.
As part of tightening monetary conditions in October-November of this year. 17 countries raised their key rates. Since the beginning of this year. the global monetary policy index increased from 4.18% to 5.10% in October of this year.
Against the backdrop of rising inflationary pressures on November 3 of this year. The US Federal Reserve announced the beginning of the curtailment of the quantitative easing program by $15 billion monthly.
In these conditions, the beginning of a cycle of rate hikes by developed countries creates risks of capital outflow from emerging markets. In this regard, the EM currencies are under pressure against the background of the strengthening of the US dollar and the growth of government securities yields in developed countries. In October of this year. the index of the basket of EM currencies against the US dollar weakened by 0.8%.
In all EAEU countries, a significant excess of the inflation target is also recorded. In Russia (8.1%), Armenia (9.1%), Belarus (10.2%), the current inflation rate is more than double the established targets. In these conditions, Central Banks are responding to growing inflationary risks by raising key rates.
In the EAEU countries, inflation is expected to stabilize in 2022-2023, but with different dynamics, taking into account current levels and responses from central banks.
It should be noted that in Kazakhstan, the business activity index in October 2021 moved into the positive zone, amounting to 50.1.
The improvement in business activity affects the demand for labor, which is growing faster than supply, reflected in the growth of vacancies by 49% in the first half of this year.
A number of industries have seen an increase in wages and job cuts for the fifth month in a row. Employees quit in search of more comfortable working conditions and higher wages.
Against the backdrop of rising wages, the service cost index has continued to grow since July 2020 from 49 to 67. The recovery in business activity and growth in wages, taking into account the high share of wages in the cost of services (50%), create additional pressure on inflation.
According to Dossaev, monthly inflation in October was 0.7%. Annual inflation remained at 8.9%, stopping growth for the first time in the last 6 months against the backdrop of a slowdown in food prices from 11.5% to 11.3%. At the same time, non-food inflation continued to accelerate from 7.5% to 7.8%, inflation of paid services — from 6.8% to 6.9%.
Food inflation amounted to 0.7% against the background of seasonal growth in prices for fresh vegetables by 5.5% and eggs (7.2%). Cucumbers and tomatoes showed the highest growth by 22%. The increase in egg prices was caused by a decrease in production at poultry farms, an increase in the cost of feed, as well as the possible cancellation of subsidies from 2022.
“Non-food inflation for the month was 1% due to a jump in prices for diesel fuel by 16.6%, or 34 tenge. A significant increase in prices for diesel fuel did not allow to reduce annual inflation in October 2021. Paid services inflation stood at 0.5% on the back of recovery in business activity and higher costs in the services sector. The growth of the IFO production of services for 9 months of this year amounted to 2.9%. In October, the number of regions with accelerated annual inflation decreased from 13 to 7 (out of 17). In 6 regions, annual inflation slowed down and in 4 regions it remained at the level of September 2021,” Dossaev said.
The stabilization of the growth of food prices in the regions is the result of the implementation by the Government and the akimats of the Anti-inflationary Response Package aimed at curbing non-monetary inflation factors.
Despite the first signs of price stabilization, the inflationary background is still high and stable. Based on these factors, in October 2021. The National Bank raised the base rate by 25 basis points to 9.75%.
For 9 months of 2021, the current account deficit decreased and, according to preliminary data, amounted to (-)$3 billion amid an improvement in the trade balance.
“Exports of goods increased by 20.4% to $43.1 billion due to an increase in oil exports by $3.6 billion, as well as non-ferrous and ferrous metals. Imports of goods grew by 2.7%, to $28 billion, largely due to the growth of consumer goods by $1.5 billion,” Dossaev said.
The recovery in oil prices led to an increase in income payments to foreign direct investors by 53.7%, to $15.7 billion from $10.2 billion in 9 months of 2020.
The continued growth of consumer imports restrains the improvement in the balance of payments and, as a result, creates pressure on the foreign exchange market.
Despite the increase in oil prices by 7.5%, to $84.4 per barrel, the national currency weakened by 0.3% over the month, to 427.15 tenge per US dollar amid recovery in economic activity and the continuing fiscal impulse.
Against the background of increased demand from business and the population, the import of Russian goods in the 2nd quarter of this year. accelerated to 36.1% in annual terms from 2.4% in the 1st quarter of this year, which led to a weakening of the tenge against the Russian ruble in October to 6.05 tenge per ruble, or 3.4%.
At the same time, the increase in the base rate preserves the attractiveness of debt instruments in tenge, as evidenced by the growth in the volume of investments of non-residents in government securities of the Republic of Kazakhstan in October by 75 billion tenge to 863 billion tenge. Additional supply of foreign currency from foreign investors contributes to the improvement of market liquidity and partial satisfaction of demand.
Stable demand for foreign exchange amid growing imports, its limited supply and volatility in foreign markets will continue to put pressure on the tenge exchange rate.
“The assets of the National Fund as of the end of October 2021 amounted to $55.1 billion. In October, $988 million was sold to ensure the allocation of targeted and guaranteed transfers for 428 billion tenge. Receipts to the National Fund in October amounted to 103 billion tenge, including $163 million in foreign currency. Investment income of the National Fund for October of this year. recovered after the market correction and amounted to $871 million mainly due to the growth of shares and gold. Due to the balanced allocation of assets of the National Fund, investment income has recovered since the beginning of the year and amounted to $2 billion or 3.44%,” Dossaev said.
Gold and foreign exchange reserves at the end of October of this year amounted to $35.8 billion, having increased by $307 million over the month.
The gold portfolio grew by $1.2 billion due to the rise in the price of gold by 3.8%, to $1,796 per ounce.
Assets in freely convertible currency decreased by $854 million mainly due to a decrease in balances on correspondent accounts of second-tier banks.
In total, gross international reserves amounted to $90.9 billion, having increased by $354 million over the month.
Pension assets of the UAPF at the end of October 2021 amounted to 13.2 trillion tenge, having increased from the beginning of the year by 337.3 billion tenge, or 2.6%.
As of Oct. 31, 2021, 545.5 thousand applications of contributors for early withdrawal of pension savings in the amount of 2 trillion tenge were executed, of which 1.95 trillion tenge, or 97.1%, accounted for the solution of housing issues.
The amount of accrued investment income from the beginning of this year amounted to about 1.2 trillion tenge, of which 14% falls on the assets of the foreign exchange portfolio.
Following the results of 10 months of this year, a profitability of 9.9% was obtained with inflation of 7%, respectively, for the UAPF depositors a real profitability of 2.9% was ensured.
Additionally, in October 2021, in pursuance of the instructions of the Head of State, the National Bank ensured the technical readiness of the National Payment System.
1. Within the framework of the Interbank Payment Card System, an infrastructure for processing card transactions has been created. Currently, work is underway to integrate this system with international payment systems — Visa, Mastercard, Union Pay.
2. Currently, the platform of the Instant Payments System, designed for retail payments and money transfers in real time, has been modernized.
The launch of the components of the National Payment System will be carried out in a pilot mode in November-December 2021.
To achieve the task set by the Head of State to stabilize inflation to 8.5% in 2021 in the remaining two months of this year. cumulative inflation should not exceed 1.4%. This task is achievable, given that historically in November-December over the past 5 years, cumulative inflation averaged 1.7%.
“Today the main attention of the Government and Akimats is paid to the growth of prices for socially significant food products. However, one should also pay attention to food products that are not included in the social package, but have a large weight in the CPI and tend to rise in price in the last months of the year. The adoption of systemic and preventive measures in order to eliminate imbalances in the commodity markets within the framework of the Anti-inflationary Response Package will allow inflation to stabilize and enter the target corridor of 4-6% in 2022,” Dossaev concluded.
Income plan exceeded by 13 billion tenge, of which taxes — by 24 billion tenge
In turn, the Minister of Finance of the Republic of Kazakhstan Yerulan Zhamaubayev informed that the indicators of the execution of public finances based on the results of 10 months of this year developed as follows.
The state budget received revenues in the amount of 8 trillion 719 billion tenge, or the plan was fulfilled by 102.9%.
The republican budget received revenues in the amount of 5.6 trillion tenge or the plan was fulfilled by 100.2%.
“In general, the income plan was exceeded by 13 billion tenge, of which taxes — by 24 billion tenge. At the same time, non-tax receipts were not executed for 14 billion tenge. The main amounts of overfulfillment on taxes are attributable to CIT, MET and ETP for crude oil,” Zhamaubayev informed.
The overfulfillment of the CIT plan is associated with an increase in the amounts of declared advance payments for 666 large taxpayers by 67%. As for the severance tax, the overfulfillment of the plan was influenced by the rise in prices for 10 months of this year. in comparison with the same period in 2020 for the main export positions by an average of 28%.
The overfulfillment of the ETP plan for crude oil was influenced by the increase in oil prices for 10 months of this year on average by 45%.
At the same time, the plan was not fulfilled for VAT on TVP and VAT on imports.
Failure to fulfill the plan for VAT on TVP is associated with an increase in the amount of VAT refund for 10 months of this year compared to the same period last year by 173 billion tenge, or 32%.
The failure to fulfill the plan for VAT on imports was affected by a decrease in imports from 3 countries for 9 months of this year. compared to the same period last year by 9% or $1.7 billion.
Revenues of local budgets were executed by 108.1% and amounted to 3.1 trillion tenge.
The plan was exceeded by 231 billion tenge, of which taxes — by 177 billion tenge.
Revenue plans were exceeded in all regions, with the exception of Mangystau region.
State budget expenditures were executed by 98.7%, republican — by 99.6%, local budgets — by 98%.
Under the republican budget, expenses were made in the amount of 12 trillion tenge.
Non-fulfillment amounted to 50 billion tenge, of which 10 billion tenge is savings.
“The largest amounts of undeveloped funds were in the Ministries of Emergency Situations, Digital Development, Innovation and Aerospace, Health, Home Affairs and Finance. The main reasons for not mastering: payment was made for the actually rendered volume of services; untimely submission of acts of completion, invoices; late submission of invoices for payment in the treasury authorities; long-term holding of tender procedures,” explained the Minister of Finance.
Local budget expenditures amounted to 6.7 trillion tenge. Not executed — 134 billion tenge.
This year, the regions are provided with targeted transfers in the amount of 2.5 trillion tenge. As of Nov. 1, they were allocated 1 trillion 813 billion tenge. Of these, 96.6% were mastered. Not executed — 62 billion tenge, including savings — 6 billion tenge, not utilized — 56 billion tenge. The greatest underdevelopment is recorded in the city of Almaty, North Kazakhstan, West Kazakhstan, Almaty and Turkistan regions.
For 10 months of this year cameral control covered about 758 thousand public procurement procedures for 6.2 trillion tenge.
Based on the results of inspections, violations were found in 34.9 thousand procedures, of which 98% of notifications on elimination of violations were executed by the state audit facilities.
2,765 audit activities were carried out. Audit covered 1 trillion 765 billion tenge of budgetary funds. Financial violations were established for 156 billion tenge.
“Violations for 123 billion tenge were eliminated by restoring the supply of goods, providing services and performing work, reimbursing to the budget and reflecting on accounting. To improve and increase the efficiency of the audit objects, 2.4 thousand recommendations were given,” noted Zhamaubayev.
The comprehensive privatization plan for 2021-2025 provides for the implementation of 733 objects.
During the reporting period, 170 objects were sold and transferred to trust management with the right of subsequent redemption in the amount of 51 billion tenge.
108 objects are on sale. 13 objects are aimed at reorganization and liquidation. 382 objects are to be realized.