The Short-term Economic Indicator showed solid growth and amounted to 5.0% in the first month of 2023.

Such accelerated development was provided by the growth of the real sector (+2.3%) and the service sector (+7.6%). Positive dynamics were observed in all major sectors of the economy, while the main contribution to its growth was made by the service industries: wholesale and retail trades, as well as the communications industry. If we consider the real sector, then the greatest growth was observed in construction.

According to data for January 2022, industry grew by 1.4%. The mining industry moved into the growth zone and amounted to 1.2% (7.2% in January 2022) for the first time since October last year. This growth was provided by the production of oil (+1%), non-ferrous metals (+9.1%) and other minerals (+7.6%). However, there was a decrease in coal and iron ore production continued compared to last year.

The Gross Value Added of the manufacturing sector increased by 1.6% as a result of an increase in the production of pharmaceutical products (+51%), food (+9.8%), beverages (+33.2%), textiles (+25.5%), tobacco products (+21.3%), and mechanical engineering (+12.1%). At the same time, there is a decrease in clothing (-13.8%) and metallurgical production (-7.4%).

The construction industry showed an impressive increase of 12.5%. In January, the construction of residential buildings decreased by 31.5% compared to the same period last year, and, on the contrary, non-residential buildings increased by 39.1%, which blocked the negative impact of the housing part. Construction of structures increased by 14.4%. In our opinion, this was due to increased investment in fixed assets, delivery of construction projects and continued government support of the industry.

All major industries in the real sector showed good growth.

Thus, the growth in the communications market was +18.1%, and in trade +19.4%: the retail sector grew by 20.8%, and wholesale – by 18.8%.Such accelerated growth of industries is explained by the last year’s low base effect due to the January events. At the same time, the development of the communications industry is supported by the state through national projects to provide citizens with high-quality Internet, and the trade – by lending from banks.

According to the BNS, the methodology in the transportation and warehousing industry was revised, as a result of which in January there was an increase of 7.9% (according to the new methodology, last year the growth was +8.6%). The growth was provided by the acceleration of passenger turnover by 49.3% and the growth of passenger traffic by 32.5%. The revenues of enterprises from transportation in the first month of this year amounted to 371.5 billion tenge.

Risks and prospects of fiscal policy development in 2023

Increased geopolitical tensions due to the conflict between Russia and Ukraine, problems in supply chains and transportation of oil in April-May of last year led to the need to provide additional support to the economy. As a result, the Government revised its budget plans for 2022 and increased expenditures.

The sources of covering expenses were the revised guaranteed transfer level from the National Fund of the Republic of Kazakhstan (revision of the plan by +1.6 trillion tenge) and own budget revenues (by +3.5 trillion tenge). At the same time, fiscal stimulus in the short term primarily affects the expansion of aggregate demand, which leads to an additional increase in inflation.

According to the results of the year, the budget deficit was reduced due to record tax revenues over the past 5 years and under-fulfilled expenditure plans.

The budget was also strongly influenced by the transfer receipts from the National Fund of the Republic of Kazakhstan, without which the non-oil deficit is significantly deepening and exceeds the levels of previous years. Thus, the further development of fiscal policy will largely depend on external macroeconomic conditions and energy prices as before.

At the same time, we believe that the new concepts being developed today for the development of various sectors of the economy, designed to ensure the further trajectory of the country’s social and economic development, will continue to put pressure on the budget expenditures.

The issue of the budget revenue growth with a reduction in the share of oil revenues, planned within the framework of the republican budget for 2023-2025, remains quite difficult in the conditions of prolonged political/economic tension and global tightening of monetary measures.

And this, in our opinion, causes some uncertainty in the planned fiscal policy implementation this year.