IMF Reports Kazakhstan’s Economy is Resilient Despite Downside Risks
The International Monetary Fund (IMF) Mission Chief for Kazakhstan, Nicolas Blancher, recently visited the country and concluded that despite the resilience of Kazakhstan’s economy and financial sector, there are substantial downside risks to the outlook.
Blancher noted that Kazakhstan’s economy has shown resilience, with real GDP growth of 5.1% in 2023 and a drop in inflation to 8.7% in April. This was partly attributed to lower international food prices and prudent monetary policy. However, downside risks such as the impact of recent floods and inflation pressures remain, which could lead to social tensions and delay reform implementation.
Monetary policy has been deemed appropriate by Blancher, with the National Bank of Kazakhstan (NBK) reducing the policy rate to 14.5%. It is emphasized that further rate cuts may be limited due to strong domestic demand and potential future increases in energy and utility tariffs. The NBK’s commitment to inflation targeting is praised, with recommendations to enhance institutional independence and the effectiveness of monetary transmission.
Looking forward, Blancher expects a tighter fiscal stance in 2024, requiring reforms to enhance policy credibility. Strengthening the bank resolution framework and macroprudential policy capacity is crucial to preserving the soundness of Kazakhstan’s banking sector.
Accelerating structural and climate-related reforms is highlighted as essential for future economic growth and diversification. The recently adopted decree for economic liberalization aims to reduce the state’s role and promote economic competition. Meeting Kazakhstan’s climate objectives will require efforts to promote green energy sources, decarbonization, and upgrades to energy infrastructure.
It is clarified that the views expressed are those of the IMF staff and may not necessarily represent the views of the IMF’s Executive Board.
