Kazakhstan macro: economy accelerates amid delayed budget spending
Last week, the Bureau of National Statistics reported that economic growth continued to accelerate on a year-over-year basis as the short-term indicator (a monthly print of economic activity) grew by 9.0% in 1H25. In 5M25, it was up by 8.6% y-o-y, and in January alone, it grew by 4.5% only. This indicator reflects economic activity in industry, agriculture, construction, transportation, communications, and trade. Such explosive y-o-y growth in recent months occurred amid base effects, and the impact of these effects on the m-o-m evolution of the short-term indicator is not easy to grasp because the BNS hides the m-o-m statistics in some instances, including the short-term indicator. In February alone, for example, the short-term indicator jumped by 10% y-o-y and has hovered around 10% in y-o-y terms since then. To better understand such statistical pirouettes, we decided in this report to concentrate on technical issues and remind readers that Kazakh statistics are not immune to various shortcomings, such as a lack of m-o-m numbers in some cases or a mismatch between m-o-m and y-o-y data.
In addition, it has become clear that this year, the economy is growing fast enough despite moderate government spending, while tax collection improved, especially in the case of the republican budget. In 1H25, tax revenues of the republican budget grew by 24.7% y-o-y amid a weaker tenge. Expenditures were up by 12.3% over the same period, which only slightly exceeds inflation, implying that the republican budget contributed marginally to economic growth in real terms. The government financed 46.7% of annually planned expenditures, having left them unamended, while spending KZT1.1 trln was delayed (out of KZT12.7 trln targeted for 1H25 and KZT25.2 trln for 2025 as a whole). Local budgets enjoyed sustainable revenue flow amid strong economic growth and high inflation. In 1H25, tax revenues reached 54.6% of the upwardly amended target (by KZT0.6 trln, and they now stand at KZT16.0 trln). Local expenditures were amended as well by about KZT1.5 trln. However, local spending was also delayed in 1H25 as governments spent only 44.7% of the amended yearly plan (about KZT3.3 trln was delayed).
Still, the economy was doing better than a year ago, hinting that the aforementioned amendments were likely unnecessary. As spending will grow in 2H25, and the unallocated amounts will flood the economy soon, inflationary pressure will likely increase, and the ongoing disinflation could be suspended.
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