According to the Committee on Statistics, GDP growth of the country in 1H2018 was 4.1% (4.1% in 1Q2018, 4.1% in 2017). According to our estimation, commodity sector (oil, gas, metals), as well as metallurgy and oil refining (which we consider as a commodity sector of the economy) contribute to GDP growth.
Short-term economic indicator (STEI) in the end of January-July amounted to 4.9% yoy in the same period of last year indicator was 5.5% yoy. The decrease was due to a slowdown in production of manufacturing, as well as a slight slowdown in mining and quarrying.
As a part of our assessment of GDP and STEI, crude oil and natural gas output, oil refining, exploration of non-ferrous and iron ores and their subsequent primary processing in manufacturing, transportation of raw materials and wholesale trade of commodities we also consider as commodity sector of the economy.
According to preliminary data published by the Committee on Statistics for the 1H2018, real GDP growth amounted to 4.1% yoy, growth rates have not changed compared to the first quarter (4.1% yoy) of this year and 2017 (4.1% yoy). Despite the decline in some sectors of industrial production in the second quarter, the continuing dynamics is due to an increase in the mining industry (13.8% QoQ), construction (90.2% QoQ), trade (14.5% QoQ), information and communication (17.1% QoQ). Compared with the previous quarter contribution of production of goods to GDP growth decreased by 0.12pp, agriculture industry increases the share of growth by 0.01 pp.
In the current period, mining and quarrying (5.2% yoy) remains the main driver of growth, although compared to 1Q2018 the share in the total growth decreased due to the expansion of the contribution of trade by 0.04pp and other sectors of the economy by 0.43pp. The share of industrial production in 1H2018 was 30.5% of GDP, which is 1.59pp of the total GDP growth (4.1% yoy) compared 1.9pp in 1Q.2018. The largest contribution to real GDP growth rate has commodity and associated to it sectors whose contribution (including trade and transportation of products of commodity sector) by our assessment order to 1.34pp in 1H2018. Trade, transport and storage have supported the current growth.
According to Committee on Statistics, volume of industrial production in January-July of 2018 totaled KZT15,504 billion in current prices, which is more by 5.1% yoy (+5,2% yoy in January-June, 2018, +5.4% y/y in January-May 2018) than in the same period of 2017. Contribution of industrial production according to our calculations in STEI is 2.55pp (more than a half of the 4.9 percent).
Commodity sector growth slowed down, industrial production growth rate amounted to 5.4% yoy (+5.5% yoy in January-June 2018). Crude oil output increased by 6.1% yoy (+6.2% yoy in January-June 2018) and made up 53 million tons (45 million tons in June) or 60.9% of the planned production volume for 2018 as per the government forecast in 2018. Index of non-ferrous metal ores output increased by 3.1% yoy (+2.5% yoy in January-June 2018). According to our calculations, contribution of crude oil and natural gas output to STEI amounted to 1.36pp in July. Contribution of commodity sector to STEI together with transportation and sales of commodities, according to our assessment, amounted to 2.3pp.
Manufacturing reached its minimum annual rate of growth and amounted to 4.9% yoy (+5.2% yoy in January-June 2018, + 6.2% in January 2018). In manufacturing a double-digit growth was registered in machine building by 16% yoy (+17.2% in January-June 2018, the share of 3.6% in industrial production), tobacco production by 13.5% yoy (+14.2% in January-June 2018), chemical industry by 10.9% yoy (+11% in January-June 2018), paper production by 10.1% yoy (+12% in January-June 2018). In the current year, all described industries, except for the production of tobacco products and machinery showed a slowdown in output.
According to our calculations, contribution of trade in STEI with an increasing growth of 6.1% yoy (5.9% yoy in January-June) was about 1.45 pp. Wholesale trade increased by 6.2% yoy (versus 4.6% yoy in January-June), in the retail segment the growth rate remained unchanged and amounted to 5.6% yoy (against 5.6% yoy in January-June).
Gross output of transport services due to the stabilization of the growth rate of industrial production provided about 0.61pp of the growth of STEI and amounted to +4.9% yoy in January-July (+4.9% yoy in January-June). The highest growth rates of freight turnover are observed in pipeline (+22.4% yoy) and air transport (+9.5% yoy). The increase in freight turnover by rail amounted to 10.9% yoy. Oil and petroleum products transportation by all types of transport, according to our estimation, is not less than 25% of the total turnover in 2018 (22.6% in 2017). Transportation of non-ferrous metals, manganese and iron ore by all types of transport, according to our estimates, is not less than 8.5% (6.7% in 2017) of the total turnover.
Increase in gross agricultural output in January-July slowed down and amounted to 3.5% yoy (4% in January-June). Contribution of agriculture to STEI in January-July was 0.15 pp.
Increase in construction volume amounted to 1.3% yoy. The sector's contribution to STEI was 0.067 pp in January-July 2018.
Increase in investments in fixed capital this year was at a high level +23.7% yoy and amounted to 5,491 billion. Investments in mining industry amounted to 42.4% of the total, and the growth rate was +44% yoy. Crude oil and natural gas investment in total production made up 36.6% and share of investment in the production of metal ore 4.0% of all investments in the period. Growth rate of investments in crude oil and natural gas production in January-July amounted to +56.4% yoy and remains at a high level. Investments in production of metal ores amounted to 29.3% yoy in the analyzed period. Investments in the manufacturing industry amounted to 12.1%, and the annual growth rate of 26.3% yoy. Investments in transport and warehousing industry amounted to 13.1% of the total in January-July 2018.
Current growth rate of industrial production growth in Kazakhstan are primarily due to the growth observed in commodity sector, which in turn creates a multiplier effect in the related industries. Thus, the contribution of commodity sector to industrial production is not less than 86%, and its share in country's GDP is more than a half. Data on the current growth of economy coincide with our expectations and forecasts of annual growth. We believe that in 2H2018, commodity prices of Kazakhstan's exports will remain at a relatively high level, and the growth of physical volumes of crude oil output in oilfields of Tengiz and Kashagan will contribute to the current economic growth. In our opinion, economy growth will be 3.9% yoy, which is slightly less than forecasted by the government of Kazakhstan at 4.0% yoy.
By Zarina Karimova and Dmitriy Sheikin for Halyk Finance (Kazakhstan).
