Analytical commentary

Active attraction of foreign investment to the Kazakh economy has increased the importance of the GNI indicator

About GNI and GDP

Since the start of the oil boom, Kazakhstan’s gross domestic product (GDP, nominal, in US dollars) has demonstrated progressive growth at an average of 13.8% per year, and cumulatively the country’s GDP has increased 14 times in dollar terms over the period from 2000 to 2023.

Even if we look at the period after the financial crisis of 2008–2009, when a certain stabilization of economic performance took place following the end of the oil boom, nominal USD GDP grew by 2.26 times in 2009–2023. This is impressive, especially on the back of the considerable weakening of the tenge against the dollar over this period.

Given the substantial contribution of foreign investments to the economy of Kazakhstan and the significant share of foreign residents (the companies they own) in the structure of GDP, the question may arise — do the size and dynamics of the gross domestic product reflect the real growth of national income — the total income of the country’s residents (both domestic and income received from investments in foreign economies)?

To answer this question, we will compare GDP and gross national income (GNI), taking into account the differences in their calculations. The structure of GNI does not include the gross income of non-residents received in Kazakhstan, and includes the income of residents sent from foreign countries (Fig. 1).

Figure 1. GDP and GNI of Kazakhstan, USD bln

Sources: national agencies, ACRA

Figure 2. The ratio of Kazakhstan’s GDP to GNI is comparable to the GDP of a number of countries

Sources: national agencies, ACRA

Kazakhstan’s gross national income relative to GDP

The dynamics of GDP and GNI in dollar terms are generally similar: sharp growth in the 2000s, peaking in 2013 and 2014, and some decline and recovery to the current values that are comparable to level of 2014.

In terms of growth of both indicators, GDP took the lead and in 2008–2011 exceeded GNI by 17%. In dollar terms, this difference was more than the GDP of such countries as Kyrgyzstan, Mongolia, and Tajikistan together (Fig. 2). In 2022, Kazakhstan’s GDP was 13% higher than its GNI (GNI for 2023 is not yet available). Although their ratio has decreased slightly relative to peak values, in dollar terms this delta is still impressive — it exceeded, for example, the GDP of Georgia or Armenia in 2022 (Fig. 2).

Such a significant difference between GNI and GDP is associated with the part of the latter that does not relate to the income of Kazakhstan’s residents, but represents foreign income from production in the country and must have its source in previously attracted foreign investments. Let’s look at the dynamics of attracting foreign direct investment (FDI) to the economy of Kazakhstan and whether this could be a factor explaining the serious discrepancies between GDP and GNI.

Investments in the economy of Kazakhstan: exceptionally active FDI dynamics

For comparison purposes, we will consider a number of countries in Central Asia and the Caucasus, which are characterized by active attraction of foreign investment (net FDI in the prices of the last year of the analyzed time range)1. In this context, the most representative will be the comparison of Kazakhstan with Azerbaijan and Turkmenistan and, to a lesser extent, with Uzbekistan and Georgia (Fig. 4).

The net FDI inflow into the economy of Kazakhstan from 2000 to 2022 (in the USD equivalent of 2022) was the largest in the analyzed region; moreover, it was 1.5% higher than the total figure for the seven economies included in the sample, far ahead of Azerbaijan and Turkmenistan that immediately follow Kazakhstan in terms of this indicator.

The group of countries that were most active in attracting FDI includes Kazakhstan and Azerbaijan, the two oil and gas-based economies in the region. The remaining countries in the sample (except Tajikistan) are a group characterized by moderate dynamics of both the FDI inflow and the gap between GDP and GNI. Tajikistan stands apart with a minimum volume of FDI and a significant gap between GDP and GNI in favor of the latter, which is explained by a major contribution of remittances relative to the scale of the country’s economy — 51% in 2022.

The most noticeable gap between Kazakhstan’s GDP and GNI has been observed over the past two decades (Fig. 3). Similar trends were observed in Azerbaijan in 2000–2008 and in Turkmenistan in 2014 and 2015. In other periods, the situation in Kazakhstan was very different: over the past seven or eight years, no country in the sample had such a pronounced gap between GDP and GNI, which makes the economy of Kazakhstan exceptional in this respect.

The extremely active inflow of foreign investments into the economy of Kazakhstan (a somewhat similar situation happened in Azerbaijan before 2008) has formed a significant gap between GDP and GNI. This gap is not typical for any other economy in the region. With this in mind, in order to more accurately assess the economy of Kazakhstan and understand its trends, close attention should be paid to the country’s GNI (jointly or separately with GDP), since this indicator reflects the dynamics of national incomes  more clearly.

1The sample includes Kazakhstan, Azerbaijan, Turkmenistan, Uzbekistan, Kyrgyzstan, Tajikistan, Georgia, and Armenia.

Figure 3. Among the countries in the sample, Kazakhstan shows the largest gap between GDP and GNI2

Sources: World Bank, ACRA

2 When the curve is above the 100% threshold, GDP is higher than GNI, and vice versa.

Figure 4. FDI (net inflow) relative to size of the economy and gap between GNI and GDP3

3 Calculations as of the end of 2022.

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Zhannur Ashigali
Director, Project Manager for Central Asian Cooperation, Sovereign and Regional Ratings Group
+7 (495) 139 03 02
Svetlana Panicheva
Head of External Communications
+7 (495) 139 04 80, ext. 169
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