According to Committee on Statistics, the country's real GDP growth in 2017 amounted to 4%. Based on our calculations, extractive industry (oil, gas, metals, coal), as well as metallurgy and oil refining (which we also consider as the commodity sector of the economy) contributed to about half of the growth in the gross product in 2017. Transport sector, linked with industry, provided another 0.4pp. Therefore, almost more than half of GDP growth of the country was formed by expansion and intensification of activity in the commodity sector. In our opinion, there are no signs of improvement in the structure of the economy.
Short-term economic indicator in January was at 4.7% yoy. In the same period last year, the indicator amounted to 3.8%.
GDP in 2017
According to Committee on Statistics, the country's real GDP growth in 2017 amounted to 4%. Based on our calculations, in the 4th quarter GDP slowed to 3.3% yoy (4.3% yoy in the 3rd quarter) due to high base of the previous year. Extractive industry (oil, gas, metals, coal), as well as metallurgy and oil refining (which we also consider as the commodity sector of the economy) contributed to about half of the growth in the gross product in 2017. The contribution of the trade sector was just over 1pp in GDP, transport provided 0.4pp.
Short-term economic indicator in January 2018
Short-term economic indicator in January amounted to 4.7% compared to the corresponding month last year. In the same period last year, the indicator amounted to 3.8%.
Industry increased by 5.2% yoy. The manufacturing industry grew by 6.2% yoy. Mining lags behind and shows a similar growth in 2017 at 4.5% yoy. Physical volumes of coal extraction declined by 13% (in the same period of 2017 - an increase of 16%). Crude oil and gas mining amounted to 7% for comparison last year 4%. If in 2017 the growth in January was mainly due to metals mining (+19.5%), then in the current year – it is experiencing a decrease of 3.4% (including a decrease in the mining of non-ferrous metals by 4.9% while an increase in the extraction of ferrous metals slightly offset the fall).
In the manufacturing sector, metallurgy (with a share of 53% of the entire manufacture) increased by 7.3% compared to the corresponding month of 2017, practically without losing the speed (growth in January 2017 – 7.5%). Much higher growth is in food production (+6%) and beverages (+10.5%), the production of refined petroleum products slowed down (+1.8% against double-digit growth in 29% in January 2016).
Thus in industrial sector production of raw materials prevails, forming according to our calculations, a half of increase of Short-term economic indicator (2.3pp from 4.7%).
Agriculture produced 3.7% more than in January last year when the index of gross output was about 0 (0.1%). The improvement of the index was expected, given the active growth of investments in fixed capital in this sector, especially in livestock (by 1.5 times yoy in 2017). Gross output of crop production remained at the level of early 2017, livestock production shows a significant increase of 3.9%.
Trade grew at once by 7.5%: acceleration was caused by an increase in the wholesale segment, which showed a 9.3% growth, while retail trade accounted for 4.3%. The growth of wholesale turnover is apparently associated with a significant increase in investment activity in industry. For example, wholesale trade in the Atyrau region has almost tripled, which is likely due to a large increase in investment in oil production and processing projects in this area.
In transport, growth was at 4% (3.5% in January 2017). The higher growth in oil and gas mining compared to last year also affects the increase in transportation volumes. The transportation by the pipeline grew by 6.4%, railway - by 12.8%.
The growth of physical volume for communication services in January was at 4.4%, for Internet services - 5.9%, for mobile communications - 11.6% (their share is about 64% in the total volume of services).
Construction against the background of a high base last year (growth was about 7.1%) fell by 14.9%. The volume of work in Atyrau region (-52% yoy in January) and Astana (-29% yoy) decreased due to the reduction in the construction of main pipelines and the completion of the international exhibition.
Investments in fixed assets increased 1.5 times in January compared to January 2017. The main increase is in industry (2 times, share in total investments 78%), both in mining and manufacture. The increase in investments in construction (the share of only 1%) was almost 5 times. Significant growth in January was due to the modernization of the Shymkent oil refinery (in that region the capital expenditures grew more than 2 times) and the expansion project at the Tengiz field and the construction of a processing plant at the Atyrau refinery (in the Atyrau region, investments also showed a 2-fold increase). Capital expenditures in agriculture decreased by 2.1%, in transport and trade, growth was almost 1.5 times (the combined share of the two industries was only 8%).
A significant increase in GDP in 2017 to 4% was possible due to the active production of commodity industries, to which we also include the production of metals and refining. The rise in prices for oil and metals, the increase in physical volumes of production have become the main factors of the increase in gross product. According to our estimates, about 1.7pp was provided by the oil and metals extraction industries, metallurgy and oil refining. Transportation services against the background of increased production of raw materials provided about 0.36 pp. Thus, almost more than half of GDP growth of the country was formed by expansion and intensification of activity in the commodity sector. In our opinion, there are no signs of improvement in the structure of the economy.
In January, the economy indicators mainly show an acceleration compared to the previous year: the increase in oil production continued, the increase in freight turnover caused the acceleration of transport. A significant increase in wholesale sales in January, we associate with the growth of investments in commodity sectors of the economy. Construction on the background of the completion of the international exhibition and a general decline in construction work has significantly subsided.
Substantial capital investments in January were mainly directed to the raw materials sector: the mining sector (2 times as compared to January 2016), metallurgy (one and a half times), as well as to oil refining (almost 3 times). The increase in investments in fixed assets in industry, in our opinion, creates the prerequisites for accelerating the index of the physical volume of industry during the year above 5%, but without changing the structure of the economy.
In general, we expect that the economic growth this year will depend on the degree of increase in commodity production reaching 3.5%, provided that prices for raw materials are fixed at relatively high levels. According to our estimates, the contribution of industrial production may be about 1.4pp in GDP. At the same time, related industries, like transport and wholesale trade, can also support the increase in the country's gross product.