Page 9 - bne monthly magazine June 2024 Russian Despair Index

bne June 2024 Companies & Markets I 9
IIF analysis shows Kazakhstan’s economy faces bumps in the road – but no major obstacles as things stand
bne IntelliNews
Delays in expanding the giant Tengiz oil field and moderation in private consumption are expected to push down the growth of Central Asia’s largest economy, Kazakhstan, to 3.5% this year from an estimated 5.1% last year, according to the Institute of International Finance (IIF).
The expansion of Tengiz, located in wetlands along northeastern shores of the Caspian Sea, is now scheduled
to be finalised in 2025, versus an initial timeline of 2H22, according to a note compiled by IIF economists Ivan Burgara and Garbis Iradian.
Kazakhstan’s hydrocarbon output is forecast to only move up a modest 0.6% this year, primarily due to the Tengiz delay, with the authorities estimating oil production (including gas condensates) will reach 90mn tonnes, level with 2023 production.
Last year’s Kazakhstan GDP growth was driven by construction and manufacturing on the production side and private consumption on the expenditure side, Burgara and Iradian say in their analysis, adding: “Agriculture was a drag on growth due to a poor summer harvest. [And] unlike some of its regional neighbors, Kazakhstan has not largely benefited from the migration of Russian skilled labor or relocation of Russian firms caused by the war in Ukraine, rather growth has been driven by robust domestic public and private consumption.
“We expect this demand to moderate slightly this year, though it will continue to be supported by scheduled
Robust domestic demand and low hydrocarbon growth will combine for modest RGDP growth this year
minimum wage hikes and pension indexation that will feed consumption, leading to non-hydrocarbon growth coming in at 3.8% in 2024.”
Returning to hydrocarbons, oil and natural gas production
in Kazakhstan have stagnated in recent years. The country is burdened by a reliance on ageing oil fields and limited export options – the worrying reality is that around 80% of all oil exported from Kazakhstan still makes its way on to export markets via Russia’s Novorossijsk oil shipment terminal on the Black Sea coast, which it reaches through a pipeline run by the Caspian Pipeline Consortium (CPC).
As the analysts note: “Kazakhstan remains highly vulnerable to a potential Russia shutdown of the CPC. Regardless of whether such a shutdown happens because of a direct confrontation between Kazakhstan and Russia or because
of the latter’s retaliation against the West [in relation to the Ukraine conflict], with 80% of all Kazakh oil exports running through the CPC, the effects could be dire.”
For Kazakhstan, the expansion of Tengiz and the diversification of export routes have to be top priorities.
Looking at monetary matters, Burgara and Iradian say the country’s tight monetary stance will this year be maintained.
Consumer price inflation declined substantially from a peak of 20.7% in January 2023 to 9.1% in March, still well above the central bank target of 5%.
After sharp increases in oil and natural gas production, both have stagnated since 2017
Source: IIF
Source: BNS and IIF
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