Kazakhstan's cost of living gloom
Despite solid growth on paper, inflationary pressures and a controlled narrative are eroding public trust and optimism, leaving the government walking a tightrope between stability and discontent.
On paper, the economy of Kazakhstan is in decent health.
The headline figure of 4-plus percent growth would gladden the heart of almost any leader in Europe or the United States.
Why, then, do things feel so terribly glum?
In a sweeping interview given at the start of the year, President Kassym-Jomart Tokayev played the role of cheerlessness-leader-in-chief.
“I am certain that 4 percent economic growth is not enough for Kazakhstan,” he said, dolefully.
The public and experts alike know the cause of this discontent: “It’s the inflation, stupid.”
The problem has attenuated over the past year, but only slightly. If the annual inflation stood at a whisker below 10 percent in 2023, it had dropped to 8.6 percent last month.
But troublingly for policymakers, the public’s sense of inflation is considerably more negative. The National Bank reported that perceived inflation rose in December to 14.6 percent. Economists warn that sentiments like these have a habit of creating self-fulfilling prophecy death loops.
Moods are already curdling.
Steep rises in the cost of utilities, public transport and medicine are generating widespread grousing.
This week, social media users in the capital, Astana, were up in arms over what they said was a shocking spike in the size of their heating bills – a big deal for one of the coldest cities in the world.
Utility companies responded to queries from journalists by denying there had been any tariff increases, which will only have incited more irritation.
While government officials appear to acknowledge that utility expenses are growing ever more painful, they emit a distinct air of helplessness in knowing how to provide succour to households. In December, Prime Minister Olzhas Bektenov ordered National Economy Minister Serik Zhumangarin to keep his eyes peeled for any “unjustified increases in tariffs and prices for utilities,” but then noted that it was important to “maintain a balance between the economic and social component.” In short, utility providers should be permitted to profit.
Groceries and consumer goods are rising in cost at sob-inducing levels too.
According to economic expert Marat Abdurakhmanov, who based his figures on fresh Consumer Price Index data, staple items across the board have risen precipitously in price year-on-year. Fresh vegetables saw a 12.4 percent increase, fruit and vegetable juices climbed by 10.5 percent, drinking water rose by 15.3 percent, and processed and canned fish became 10.7 percent more expensive. On and on it goes. Electronics, cars, and jewellery have seen price tag jumps much higher than the stated rate of inflation.
Abdurakhmanov attributed the price rises to rising production costs and supply chain disruptions.
Much of this is downstream from the travails of neighbouring Russia, which has made life complicated for Kazakhstan by rendering itself a global pariah.
New sanctions slapped on Russia in November caused the ruble to slump. The Kazakh tenge quickly followed suit. If a dollar got you around 455 tenge at the start of 2024, it now fetches 530 tenge. This is a grave trend for a population that buys so many imported finished goods. The National Bank has spent hundreds of millions of dollars steadying the boat, but there is a limit to its scope for action.
Among President Tokayev’s recurring mantras are the ideas that Kazakhs need “quality jobs” and that productivity must be boosted. Achieving those goals will shunt the population from keeping their head above water toward prosperity, he contends.
It is in that spirit that much time is expended on talking about supporting private enterprise. Tokayev spoke in his interview about legislation adopted last year to dispatch the dreaded checkboard-wielding government inspector – and their alleged penchant for a backhander – to oblivion.
“We are putting order into the system of state control, transitioning from inspections to preventive measures, and introducing so-called ‘clean slate’ regulation,” he said.
Small and medium-sized businesses, which are estimated to account for nearly half the country’s employed population, will continue to get subsidies, preferential loans, and loan guarantees, Tokayev said.
But what the state gives, the state also taketh away.
In late November, the National Bank, desperately trying to avoid a bad end-of-year inflation headline, raised the base interest rate by 1 percent, to 15.25 percent – ominous policy for business activity.
All this is as much a political story as an economic one.
Commentators speculate that the Tokayev administration’s campaign to sideline cronies of his predecessor, Nursultan Nazarbayev, has given rise to a dangerous sense of resentment among well-resourced people with an axe to grind.
Tokayev’s team might be making things more difficult for themselves than necessary.
The government may not be able to control the global developments buffeting Kazakhstan, but they are in charge of their own narrative and of how they engage with the public. Tokayev spoke loftily in a 2019 speech, shortly after he became president, of establishing a “listening state” that would respond “promptly and efficiently … to all the constructive requests of citizens.”
The reality is that the public conversation is barely any livelier now than it was then. On matters deemed to be of major importance to the authorities (and Tokayev personally) – such as last year’s referendum on nuclear energy – engaging in overly awkward dissent still carries a health warning.
The prevailing impulse is still to control the message. And that is a largely fruitless endeavour.