Recently released data on first-half budget results for Kazakhstan show a consolidated budget surplus (central and local budgets) of 87.3 billion tenge in the first five months of this year. A conservative budget forecast of 4.0 percent GDP growth in 2001 and average inflation of 6-7 percent has resulted in actual revenues in 2001 far exceeding all targets. Revenues were 7.1 percent more than projected because of faster economic growth and higher than expected inflation. Tax revenues have been so buoyant that the Kazakh government has reduced value-added tax rates from 20 to 16 percent and social security taxes from 26 percent of wages to 21 percent as of July 1, 2001. Expenditures were 21.8 percent less than targeted for the period.
The central government budget surplus was 63.1 billion tenge in January-May. The state budget had targeted a deficit of 55.8 billion tenge (US$371 million) or approximately 2.1 percent of GDP for the year. Revenues jumped 61.8 percent year-on-year to 228.8 billion tenge. In contrast to consolidated budget spending, central government spending was up 23.1 percent to 165.7 billion tenge. The difference stemmed from performance on off-budget funds.
The key to the excellent budget performance has been rapid economic growth. In the first half of 2001, economic output has surged. Industrial output was up 13.6 percent in the first half of this year compared to same period of 2000. Mining, primarily oil and natural gas, jumped 21.7 percent while manufacturing rose 11.6 percent in the first half. Much of the growth in GDP in 2000 was driven by exports. Last year, exports surged 63 percent, primarily because of increased volumes and prices for oil. This year, export growth has slowed; dollar exports were up 9.8 percent in the first quarter. Although not as strong as in 2000, the ongoing increases in exports bode well for the economy this year. The key driver of economic growth in 2001, however, is domestic demand. Gross fixed capital investment jumped 33.5 percent in the first half of this year. Retail sales rose 11.5 percent in the first four months of the year. The flip side of more rapid growth in domestic demand has been a shift in the current account balance. In 2000, Kazakhstan reported a current account surplus of US$1,074 million. In contrast, the current account swung into a small deficit of US$99 million in the first quarter of 2001. Kazakhstan will need to rely on foreign financing this year to pay for rising imports (CIS Statistical Office).
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