Robust Oil Revenues Allow For Expansionary State Budget
BMI View: Kazakhstan's general government budgetary position will remain robust over our forecast period due in large part to the country's National Oil Fund. Relatively high oil prices over the coming years will enable the government to run a state budget deficit (consisting of the central and local governments but not including the National Oil Fund) in line with President Nursultan Nazarbayev's long-term plan to improve Kazakhstan's social welfare via higher public spending.
We forecast the general government consolidated budgetary position to remain in strong surplus over our forecast period to 2021. In 2012 and 2013 the general government surplus will fall to 9.8% of GDP, down marginally from 2011 at 10.3% of GDP. The weak external environment will translate to weaker revenue growth in our view, which we forecast to come in at to 15.0% in 2012, 16.0% in 2013 from 33.1% in 2011. However, high global energy and commodity prices will preclude a more substantial slowdown in revenue growth. Kazakhstan is highly dependent on global commodity prices as a net hydrocarbon exporter and major exporter of grains and livestock. In spite of a weak global economic outlook, prices for commodities Kazakhstan exports remain high by historical standards due to a number of supply-side constraints, which will keep revenues to the government, in particular to the National Oil Fund (NF) well supported.
|State Budget To Remain In Deficit|
|Kazakhstan - State budget (central and local government), KZTmn & % of GDP (RHS)|
High oil revenues will see to it that the government is able to continue running a deficit on the state budget (consisting of the central and local governments but not including the National Oil Fund) in line with President Nursultan Nazarbayev's '2010-2014 National Program of Forced Industrial and Innovative Development' to improve the social development in the country.
|Government To Keep Spending Elevated|
|Kazakhstan - Select components of government expenditure, % chg y-o-y|
We forecast the state budget deficit to widen to 2.9% of GDP in 2012 and 2.6% in 2013 from 2.1% in 2011. Public spending on education, public health and social security will continue to make up the bulk of government expenditure, totalling 50.6% of total spending in 2011, up from 49.6% in 2010 and only 27.8% in 2008. We forecast state expenditure to increase by 28.0% in 2012 and 20.0% in 2013, up from 21.7% in 2011.
|Tax Revenues To Remain Relatively Robust|
|Kazakhstan - Tax revenues, % chg y-o-y|
Growth in revenues to the state budget will increase by 20.0% this year and by 22.0% in 2013, down slightly from the 24.9% growth racked up in 2011. Indeed, revenue growth has held up well this year, propped up by continued growth in tax receipts. Over the period January to June according to data released by the ministry of finance, tax receipts increased by 27.0% year-on-year (y-o-y) on average, while nontax receipts have remained under pressure falling by an average 7.2% y-o-y in the same period.
Risks To Outlook
The key risk to our fiscal outlook for the Kazakh government remains global oil prices. A more precipitous fall in global energy prices would have a serious impact on the Kazakh government's ambitious modernisation and social spending plans. Indeed, strong revenues into the National Oil Fund, with assets equivalent to KZT7.7trn (USD50.6bn) at end-2011, are key to the government's ability to run an expansionary fiscal policy. A dramatic fall in these revenues would put severe strain on the government's spending plans and cause the surplus on the general government budget to fall and the deficit on the state budget to widen.
|Notes: f BMI forecasts. 1 1990-2006, IMF data used. As of 2006, data is provided by the Ministry of Finance. All forecasts based on Consolidated Budget data.; 2 Fiscal balance stripping out interest payments on government debt. 1990-2006, IMF data used. As of 2006, data is provided by the Ministry of Finance. All forecasts based on Consolidated Budget data.1990-2006, IMF data used. Sources: 3 IMF/BMI/Ministry Of Finance of The Republic of Kazakhstan.|
|Fiscal revenue, KZTbn 1,3||6,866.5||4,883.4||6,572.7||8,746.1||10,058.0||f||11,667.3||f||13,067.3||f||14,635.4||f||16,391.7||f|
|Revenue, % of GDP 1,3||42.8||28.7||30.1||32.0||34.6||f||36.2||f||36.4||f||36.6||f||36.7||f|
|Fiscal expenditure, KZTbn 1,3||6,221.1||3,746.8||4,457.2||5,423.2||6,779.0||f||7,999.3||f||9,039.2||f||10,214.3||f||11,542.1||f|
|Expenditure, % of GDP 1,3||38.8||22.0||20.4||19.8||23.3||f||24.8||f||25.2||f||25.5||f||25.9||f|
|Budget balance, KZTbn 1,3||-340.3||885.4||1,746.3||2,806.6||2,837.5||f||3,171.9||f||3,518.2||f||3,990.4||f||4,388.9||f|
|Budget balance, % of GDP 1,3||-2.1||5.2||8.0||10.3||9.8||f||9.8||f||9.8||f||10.0||f||9.8||f|