Last year The Economist called the year of 2024 as the “year of elections.” Indeed, this year 88 countries being home to at least 49% of the world’s population have already held or are to hold national elections.
For example, in Ukraine the elections scheduled for March did not take place due to the declared Martial Law. At the same time, in Russia the Presidential elections taken place in March resulted in Putin’s re-election. Meanwhile, on another continent the focus is on the US presidential elections that are set to take place on November 5, 2024. This is the 60th US presidential election where the 47th President of the United States will be elected.
It might seem that presidential elections are purely political phenomenon. However, practice shows that this event significantly impacts the economic situation worldwide. For instance, in its regular Fiscal Monitor review in April this year the International Monetary Fund (IMF) identified presidential elections in countries as one of the factors for increasing budget deficits. “Empirical data indicates a bias towards larger budget deficits in election years. And this time, the political discourse is particularly loud in favor of budget expansion,” the IMF writes.
Despite the absence of elections, the problem of budget deficit and increasing fiscal expansion is also on Kazakhstan’s agenda. This topic became the focus of the current review’s cover story. In the first six months of this year, Kazakhstan’s economy faced significant shortfalls in tax revenues to the republican budget: tax revenues for January-June, 2024 were 14% lower than in the same period in 2023 and 24.1% below the plan. Forced financing of flood consequences amidst declining tax revenues forced the Government of Kazakhstan to withdraw 3.0 trillion tenge from the National Fund, which is already 3/4 of the guaranteed annual transfer amount, borrow nearly 2.5 trillion tenge, and sell shares of JSC “Kazatomprom” to the National Fund.
Despite budget imbalances, economists still see positive growth prospects for both Kazakhstan’s and the global economy. For instance, the IMF maintained its global economic growth forecast for 2024 at 3.2% in July and improved its growth forecast for Kazakhstan for this year from 3.1% to 3.5%. According to the June Global Economic Prospects report, the World Bank forecasts global economic growth in 2024 at 2.6% (y/y) and Kazakhstan’s economy at 3.4% (y/y).
In the current review, compared to the April review, AERC lowered its economic growth forecast for Kazakhstan for 2024, considering the slowdown in output growth in several industries and the decline in fixed capital investment in the first half of 2024. According to the aggregate demand model, GDP growth is forecasted at 4% (previously – 4.2%), and according to the aggregate supply model – 3.9% (previously – 4.2%). The consensus forecast for economic growth for 2024, considering rounding, is 4.0% (y/y).
AERC is lowering its economic growth forecast for 2024 for the second consecutive review. AERC improved the average annual inflation forecast for 2024 to 8.4% (in April – 9.1% (y/y)). The complex situation with tax revenue replenishment led to the deterioration of AERC’s budget deficit forecast: a deficit of (-)5.1% of GDP is expected (in April – (-)4.7% of GDP). Simultaneously, AERC expects a current account deficit of (-)6.1% of GDP in 2024 (in April – (-)6.5% of GDP).
Evgeniya Pak
Managing Director, AERC
