How Is It That Tokayev’s Kazakhstan Has Higher Inflation Than In War-Torn Ukraine? – OpEd

While delivering a speech at the opening ceremony of the Astana International Forum, Kazakh President Kassym-Jomart Tokayev enthusiastically spoke of the achievements of his country’s economy. “Despite geopolitical upheavals Kazakhstan keeps serving as an economic engine in and for Central Asia. We continue to attract significant foreign investment and provide exceptional conditions to do business in Kazakhstan… Last year, Kazakhstan’s exports increased by almost 40 percent. While a significant proportion of our GDP still comes from the energy sector, our drive towards diversification is accelerating”, he said.

The Kazakhstani economy’s current performance seems to give him even more reason to take pride in the work his administration and government do. In his speech at the 35th plenary session of the Foreign Investors Council (FIC), which coincided with the Astana International Forum on June 8, he said that Kazakhstan had successfully adapted to external realities with the real growth of its economy by 5 percent in the first four months, which is three times the global average projected growth rate for 2023. He also noted that ‘nowadays Kazakhstan is different from what it was two years ago’. To which one commentator said: “[That the situation in the country is] now of course different [than 2 years ago], and it differs to the worse. Inflation is over 20 percent. Prices have tripled over the last 2 years. Where are foreign investments going in conditions where the people are getting poorer? What has fallen in price over the last 2 years? The monthly minimum salary has increased by 30 000 tenge [around US$ 65], and that all one got? This is just laughable”.

In brief, the picture is following – the way things are doing in the Kazakh economy suits the Kazakh President, but not most of his ordinary co-citizens. One gets the impression that he is delighted with the economic developments of recent years in Kazakhstan – much to the annoyance among common people in the country.

Why would they be happy with those developments if in 2022, Kazakhstan was experiencing higher inflation than were most other CIS countries, except Ukraine on the territory of which, there was war, that is still continuing today?! Of course, one can refer to the fact that the geopolitical crisis, caused by Russia’s invasion of Ukraine and resulted in the spike in energy prices, had a knock-on effect on global inflation in 2022, and the Central Asian nation was not spared by the negative impacts of this factor. What is true is true – during the period from March through June, 2022, all post-Soviet countries, including even those who are now the members of the European Union (Lithuania, Latvia and Estonia) certainly felt the effects of that crisis, but not everywhere equally.

During this time, inflation rates in Azerbaijan, Armenia, Kyrgyzstan, Uzbekistan and Georgia behaved slightly differently than they usually did and quickly went close to the upper boundaries of their corridors of fluctuations, stopping within 9,1% (in Georgia) – 13.1% (in Kyrgyzstan). In the second half of 2022, the situation with inflation in that group of countries kind of calmed down.

In Azerbaijan, for instance, rising food prices pushed inflation in annual terms up to 12.2% by the end of March, 2022. Later on, the rate stabilized and remained within 12.6-13.9%.

In the conditions created by Russia’s invasion of Ukraine, prices went up dramatically in three post-Soviet Slavic States, Russia, Ukraine and Belarus, as well as in Kazakhstan. By the beginning of autumn, official Moscow and official Minsk managed to slow the inflation pace in their respective countries. Among the above-mentioned post-Soviet countries, only Kazakhstan and Ukraine continued to exhibit very high growth rate of inflation until the end of that year. Their inflation rates in 2022 were 20.3% and 26.6%, respectively. In May of this year, Kazakhstan has already overtaken Ukraine on this indicator – 15.9% vs. 15.3%. And, as said, there will be more. Starting on 1 July, 2023, there will be the increase in gas and utility prices in Kazakhstan. It can be assumed that this will lead to a new inflationary surge.

One only wonders how is it one got to manage economy to have in Tokayev’s Kazakhstan higher inflation, than in war-torn Ukraine?!