IMF expects Kazakhstan's GDP to grow 3.5%, inflation to slow to 8% in 2024
ALMATY. June 4 (Interfax) - The International Monetary Fund forecasts that Kazakhstan's GDP will expand by 3.5% in 2024 and the inflation will slow to 8%, the IMF said in a statement following the visit by an IMF mission to Kazakhstan.
"Kazakhstan's economy has remained resilient. Real GDP expanded by 5.1 percent in 2023, and inflation declined to 8.7 percent in April 2024, including as a result of lower international food prices and prudent monetary policy. For 2024, growth is projected to moderate to about 3.5%, supported by robust activity in manufacturing, construction, and services, while inflation would be close to 8% by the end of the year," the statement says.
In its April report, the IMF expected Kazakhstan's GDP to rise 3.1% in 2024 and the inflation to be 8.7%.
However, according to the IMF, downside risks to the outlook remain substantial. External risks include slower than projected growth of trading partners or higher imported inflation pressures; adverse spillovers from the situation in Ukraine through trade, foreign investment, and exchange rate channels; lower than projected oil prices; and secondary sanctions stemming from transactions with Russia,
Domestic risks include the impact of the recent floods; inflation pressures, for example from energy and utility tariff increases, which could fuel social tensions and delay reform implementation.
The IMF mission commended the commitment of Kazakhstan's National Bank inflation targeting and stressed the importance of enhancing its institutional independence. Monetary policy has been appropriately tight and should remain so until inflation is close to its 5% target. Room for further rate cuts is constrained by strong domestic demand and the prospect of further energy and utility tariff increases, the statement says.
For 2024, the fiscal stance is expected to tighten, and reforms are still needed to enhance policy credibility, according to the IMF.
"To bolster the credibility of medium-term fiscal commitments, the new budget code under preparation should strengthen fiscal rules by establishing strict escape clauses and rule out any discretionary transfers from the National Fund," the statement says.
The forthcoming introduction of a new tax code is an opportunity to raise non-oil revenues, and the mission recommends raising the value-added tax rate and accelerating the elimination of onerous tax exemptions, the IMF said.
The IMF's recommendation is that Kazakhstan should strengthen its bank resolution framework and macro-prudential policy capacity in order to preserve the soundness and resilience of the country's banking sector.
The IMF mission welcomed recent progress in bolstering the independence of the Agency for the Regulation and Development of the Financial Market and noted that accelerating structural and climate-related reforms remains essential to raise future economic growth and diversification.
"The recently adopted decree for economic liberalization lays out important goals and steps to reduce the role of the state and increase competition in the economy, and its timely implementation would bring about significant progress," the statement says.
The mission was in Kazakhstan from May 23 to 31.
