WOOD Flash – Kazakhstan macro: energy price surge triggers leadership changes

As a result of wider protests sparked by energy price hikes, today (5 January), President Tokayev accepted the resignation the cabinet, declared a state of emergency; and even though the situation remains fluid, the events that followed seem to be indicative of a consolidation of power around the president. The protests were ignited initially by an increase in LPG prices, but they soon became more structural, on the direction of the country, with the protestors asking for free elections, moves against corruption, President Tokayev’s resignation, and for first president Nazarbayev to leave the country. As of today, President Nazarbayev is no longer leading the security council, with Tokayev taking over the role. The speed at which the protests escalated was impressive and we believe that some reform promises and fiscal loosening may be on the way, which would help to reduce tensions. The fiscal outlook is strong and resilient, and unveiling some additional fiscal stimulus this year should not be an issue in the medium term. If there is no additional deterioration in the coming days, the main consequence would be a further consolidation of power for President Tokayev and some quicker steps towards democratisation. Another lesson we can take from this is that, with inflation harming purchasing power globally, these are unlikely to be the only protests we will see this year. It also suggests a broader trend on fiscal policies globally, as governments are likely to find themselves having to compensate households partially for the price increases if they want to stay in power, which adds risks to the fiscal outlook in our region.