EME Macro/Strategy: Kazakhstan – faster growth in 2022E, as privatisations resume

Our recent trip to Nur-Sultan reinforced our view that the COVID-19 crisis caused significant harm to Kazakh society, in addition to the first GDP contraction in 20 years. Nonetheless, the authorities responded promptly, with strong policy measures, which helped to contain the GDP decline and the societal damage. Going forward, the economy is in an acceleration phase, in our view, and we have increased our GDP growth forecast to 4.4% for 2022E, and we forecast 4.2% in 2023E – supported by strong external dynamics, credit growth momentum, and a relatively stable exchange rate from a fair value perspective. We see 3.5% as a realistic potential growth rate for Kazakhstan over the medium term, backed by positive demographics and a solid reform agenda. Upward risks for inflation, which may push the central bank to keep a stronger tightening bias, comes from the high inflationary expectations and, to a lesser extent, the stronger growth prospects.