Strong current account deficit persists in 3Q23

KAZAKHSTAN - In Brief 02 Nov 2023 by Evgeny Gavrilenkov

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The National Bank reported that in 3Q23, the current account again registered a strong deficit ($2.9bn), although this deficit was slightly narrower than in 2Q23 (close to $3.3bn). In 9M23, the current account deficit widened to almost $7.7 bn. The trade balance in 9M23 was in surplus ($13.7 bn), and in 2Q23 and 3Q23, this surplus remained relatively unchanged ($4.2-4.3 bn). Monthly exports and imports stabilized at about $6.5bn and $5.0bn. A strongly negative and persistent income balance ($19.6 bn in 9M23, i.e., about $2.2 bn per month) usually pushes the current account into negative territory. In 2Q23 and 3Q23, an average monthly trade surplus was about $1.4 bn. It looks as though in 4Q23, the current account deficit will be about $3.0 bn again - implying about a deficit of $11.6 for 2023 as a whole. The paradox is that the tenge remains too strong, as after some weakening in recent months, it appreciated to below $/KZT 470. Most likely, increased FX sales from the National Fund were one of the main factors that contributed to such appreciation. According to Minfin’s statistics, tax collection was well behind the plan in 9M23, and most likely, the situation didn’t change in October. To finance planned expenditures in full, the government had to unlock its coffers. In September alone, it sold nearly $1.2 bn, which was well above the amounts seen in the previous months. Meanwhile, an excessively strong tenge drags the revenue flow (see more color on this issue in the forthcoming report).