Asian Development Bank lowers 2024 GDP growth outlook for Kazakhstan to 3.8%

ALMATY. April 11 (Interfax) - The Asian Development Bank (ADB) has revised its GDP growth outlook for Kazakhstan in 2024 to 3.8% from the 4.3% it was predicting in December.

"GDP growth is expected to moderate in 2024 but rebound in 2025. Growth is projected to dip to 3.8% in 2024 with a slowdown in industry due to stagnant oil production and then accelerate to 5.3% in 2025 as Tengiz oil field expansion boosts oil production starting in the second quarter of 2025," the ADB said in its April report.

Downside risks to the outlook include negative spillover from the Russia-Ukraine conflict, slower-than-expected growth in trading partners and potential disruption to oil exports routes, according to the ADB.

Inflation is projected to slow further in 2024 and 2025 but remain above the central bank target. "Amid robust demand and rising fuel and utility prices, inflation is forecast to slow gradually to 8.7% in 2024 and 6.3% in 2025, assuming relatively tight monetary policy and continued exchange rate stability," the document says.

ADB expects prices for services in Kazakhstan to become the major source of inflation, rising by 9.8% in 2024 and 8.1% in 2025 because of government-announced increases for utility prices.

"Growth in services is forecast to slow to 4.7% in 2024 after the record increase in 2023 and then recover to 4.9% in 2025 supported by trade, transport, and hospitality, and benefiting from trade facilitation between Europe and Asia," the report says.

Growth in industry is forecast to slow to 3.5% in 2024 with smaller gains in mining and accelerate to 5.7% in 2025 as oil production increases, according to the ADB.

The bank suggests that Kazakhstan should address distortions from subsidized lending, which has proliferated since the global financial crisis of 2008-2009 and created excess liquidity in the country.

The ADB proposed practical measures that may be taken by the government of Kazakhstan to address the subsidized lending issue.

"The government needs to disclose both the extent of financial support provided by subsidized lending and its opportunity cost Alternative financing mechanisms can be deployed by shifting to state guarantees and insurance to cover business risks, rather than subsidizing interest rates. The government needs to adopt a strategy to phase out subsidized lending programs like those of the central bank. Any remaining subsidized lending programs need clearly defined objectives, intended beneficiaries, eligibility criteria, and other appropriate conditions," the report says.

Kazakhstan's GDP grew 5.1% in 2023. Inflation slowed to 9.8% from 20.3% in 2022.