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throughout most of 2018, but it acquired fresh downward momentum in July which accelerated in August. Some Kazakh analysts argued earlier in
2018 that the tenge was “overvalued” and that its “real value” stood at around KZT420 to the dollar.
Another major effect on the tenge probably comes from the demoralised Kazakh population’s general distrust
of the country’s regulator – most of
this stems from devaluations of the currency prior to the central bank adopting the free-floating exchange rate in 2016. Kazakhstan has experienced
no less than six such devaluations
or “devalvatsiyas” – a word that has come to signify the rapid and sudden weakening of the tenge rather than
a general term for loss of value over time – since gaining independence in 1991. The adoption of the free-float currency system essentially tied the tenge directly to changes in world oil prices and the rate of the Russian ruble.
Kazakh companies are buying dollars on fears that US sanctions against Russia are set to intensify. Kazakhstan and Russia have close trade ties, where the latter approximately accounts for 35% of the ex-Soviet Central Asian nation’s trade. Russia’s ruble is under threat from new US sanctions that may appear in the New Year and its outlook is uncertain.
Inflation and rates
Annual consumer price inflation
in Kazakhstan stood at 5.3% in November, in tune with the central bank’s expectations. Inflation in Kazakhstan was projected by the regulator to stay between 5-7% in 2018. The forecast for 2019 is for inflation
to fall to between 5.0-5.5%. The central bank said it planned to aim to achieve a 4% inflation rate by 2020.
The central bank in July cut its policy rate for the fourth time in 2018, reducing it to 9% from 9.25%, but tightened its monetary policy, boosting it 0.25 percentage points up in October. It previously stated that it was aiming to maintain the policy rate at four percentage points above the level of inflation.
The investment activity in the
period was supported by Chinese investments as part of the huge One Belt One Road initiative, which seeks to deploy investments in Kazakhstan to enable the creation of transit
hubs for Chinese goods heading to Europe and vice versa. Growth was also likely driven by rising oil prices and expansion in oil production – mostly at the giant Kashagan field.
Oil and gas
Kazakhstan’s economy ministry has forecast that the country's oil production will stand at 88mn tonnes in 2019, the Times of Central Asia reported on October 31.
Kazakhstan previously promised to increase its oil output by 0.9% in
2018, with the volume to amount
to approximately 87mn tonnes. At
the current rate of output the final figure might end up exceeding the government’s forecast. Kazakhstan’s oil output in the first nine months of 2018 grew by 5.3% y/y to 67.3mn tonnes, Energy Minister Kanat Bozumbayev told a government meeting on October 16.
The giant Kashagan oil field, which has been ramping up output since its relaunch in late 2016, will see
in 2018 will amount to 15bn cm. Gas production in Kazakhstan rose by 5.9% y/y to 41.45bn cm in the first nine months of 2018, where petroleum gas output grew by 10.3% y/y to 24.4bn cm, according to official data. In 2017, gas output jumped 14% y/y to 52.9bn cm and it was forecast to rise to 53.5bn cm in 2018. Kazakhstan's three giant oil and gas projects, Karachaganak, Tengiz and Kashagan, account for over two-thirds of the country's total gas reserves.
Kazakhstan launched its gas exports
to China in October 2017 as part of a one-year deal between KazTransGaz
and PetroChina for shipping 5bn cm
to China. Gas to China flows via the Beineu-Bozoi-Shymkent pipeline, which, in turn, links to the Kazakhstan-China pipeline, part of the larger 7,500-km Central Asia-China pipeline, which also includes Turkmenistan and Uzbekistan.
Agriculture
In addition to oil, Kazakhstan’s agri- cultural sector has grown quickly in 2018 and is becoming a new source of foreign exchange earnings. Kazakh wheat exports in September, as part of the 2018-2019 marketing year, were up 46.3% y/y at 376.8 kilo metric tonnes (KMT), marking the largest volume of wheat exports in the ninth month since
“The giant Kashagan oil field will see its output reach 380,000 barrels per day by the end of 2018”
its output reach 380,000 barrels per day by the end of 2018, Kazakh authorities have previously said.
Kazakhstan's state-run gas transit company KazTransGaz and PetroChina International Company signed a five- year contract on October 15 to double Kazakhstan’s natural gas exports to Chi- na to 10bn cubic metres (cm) per year in 2019. KazTransGaz hopes to earn rev- enues of $2bn a year from the exports.
The Kazakh government estimates the country’s total natural gas exports
the 2013-2014 marketing year, UkrAg- roConsult reported on November 11.
The exports appear to be growing despite Kazakhstan’s aim to shift exports toward oilseeds and pulses away from wheat. Kazakhstan’s wheat production is expected to decline 5.4% y/y to 14mn tonnes in 2018 as farmers reduce the planted area to the second- lowest level since 2004. Despite the steady decline in output, Kazakh wheat exports in the 2017-2018 marketing year exceeded the previous marketing year by 43.6% and hit a six-year high.
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