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Kazakhstan's reported 6.5% GDP growth for the past year is not a straightforward success story, according to economist Arman Beisembaev. He argues that while the numbers reflect economic activity, they don't fully capture the economic instability experienced this year.

GDP Growth: Numbers Without Substance?

Beisembaev points to several factors contributing to the GDP figures, with inflation playing a significant role. Rising prices inflate the GDP numbers, but without an increase in the actual volume of goods and services, this represents a quantitative, not qualitative, growth.

Another contributing factor is the increased share of the manufacturing sector. However, this sector still requires substantial state support and is not yet capable of generating significant foreign currency income through exports. Its overall contribution to the economy remains modest.

The growth in oil and raw material production, particularly from large deposits, along with higher uranium prices, also boosted economic performance. Government investments in infrastructure, including the modernization of power plants and construction of roads and railways, have stimulated economic activity. Sectors like trade, banking, and construction have also shown positive results, partly due to government support, such as preferential mortgage programs.

A Resource-Dependent Economy

While the share of the oil sector in GDP has decreased, Beisembaev clarifies this doesn't mean production has shrunk. Instead, the faster development of other sectors has reduced oil's relative weight. Although Kazakhstan aims to move beyond raw material extraction towards processing, the pace of this transition is insufficient.

The future economic trajectory hinges on political will. The government is adopting strategies seen in other countries, supporting certain sectors and fostering new ones. Kazakhstan is not abandoning oil production, but the key challenge is maintaining balance. The goal is to integrate manufacturing into the oil sector, increasing the share of high-value-added products.

The export structure still heavily features raw materials. Products like grain, iron ore, and oil are exported without further processing, allowing the country to profit from raw resource sales while lagging in value-added manufacturing.

Economy, Politics, and the Rules of the Game

Since the collapse of the USSR, Kazakhstan entered the global economy primarily as a raw material supplier, a role it has maintained for decades. This reliance on resources, without a complex domestic production base, makes the economy susceptible to cyclical fluctuations. Changes in oil prices can destabilize the economy, risking a slide into a new crisis before fully recovering from the previous one.

The simpler an economy, the more vulnerable it is to change. Complex economies with developed industries navigate crises more smoothly because a downturn in one sector can be offset by growth in another. In countries like the United States, fluctuations in oil prices have a less significant impact due to their multi-layered, high-tech economies.

The concentration of Kazakhstan's economy on oil remains a significant issue. Political decisions directly shape the economic model. The 'rules of the game' set by the state determine business operations and economic stability. Unstable and opaque rules hinder entrepreneurs' long-term planning.

VAT, Inflation, and Economic Adaptation

The situation in Kazakhstan depends on concrete decisions made by the authorities. Concerns have been raised that certain provisions in the new Tax Code could impede entrepreneurial activity.

While an initial sharp price increase was anticipated with the potential rise of VAT to 16%, this did not materialize broadly. However, in some sectors, tax increases are affecting the cost of goods and services, with consumers bearing the additional expenses. The VAT increase is expected to gradually fuel inflation, but not lead to a widespread price surge. Over time, businesses and the economy will adapt to the new conditions.

Inequality, Loans, and Living Standards

The country lacks a clear strategic vision, with reforms often left incomplete and the economy developing through half-measures. Despite being termed a market economy, the state actively intervenes through quasi-state companies and price regulation, which is atypical for market economies.

A fully-fledged middle class has not yet formed. Many citizens live at a level where they can only afford food and basic necessities, leading to increased demand for loans. People borrow not to improve their lives, but to maintain their current consumption levels.

Despite last year's economic growth, the population's living standards have declined. This is because the majority of income is concentrated in the hands of a small elite. The economy prioritizes consumer loans, with the mortgage portfolio significantly lagging behind.

Tenge Exchange Rate and Interest Rate Forecasts

An increase in budget revenues and a strengthening tenge could positively impact the exchange rate, but a significant improvement in living standards is not anticipated. The tenge's strengthening is seen as a temporary phenomenon, influenced by high oil prices and the National Bank's high interest rates.

The National Bank is expected to gradually lower interest rates to curb inflation. This could reduce interest in tenge assets and lead to capital outflow, causing the tenge to weaken again. Under favorable conditions, interest rates might decrease to around 16% in the second half of the year.