Development of agricultural production and processing industry to stabilize inflation in Kazakhstan

Business Materials 18 August 2011 16:09 (UTC +04:00)

Azerbaijan, Baku, Aug.18 / Trend, E. Ostapenko /

The growth of inflation in Kazakhstan continues. This requires urgent actions to deter the trend. The National Bank of Kazakhstan does not exclude the possibility of a rise in the target inflation corridor to 7.9-8.1 percent in 2011.

Magbat Spanov, the president of the Institute of Development of Kazakhstan, expects higher indicators.

"A more realistic figure is 9.5-10 percent," Spanov said.

According to the State Statistics Agency, annual inflation in Kazakhstan in 2010 amounted to 7.8 percent. An increase was observed in prices and tariffs for paid services by 2.2 percent in February. Food prices rose by 2 percent and non-food prices by 0.2 percent.

Spanov, a doctor of economics, said a number of factors affect a rise in inflation. They include a recent increase in the salaries of teachers and doctors, the global upward trend in food prices, and the Customs Union (CU) between Russia, Kazakhstan and Belarus.

CU tariffs have been oriented around Russia. After the CU was established, the prices sharply rose in Kazakhstan, beginning with gasoline and oil prices, ending with food.
"Given monetary factors' minimal impact on inflation, monetary policy measures may be insufficient to preserve price stability in Kazakhstan's consumer market," the National Bank statement dated Aug.12 says.

In March, amid rise in inflation (in January - 1.7 percent, in February - 1.5 percent), National Bank of Kazakhstan has raised the refinancing rate from 7 to 7.5 percent. However, this measure has not lead to tangible results.

Spanov said given the National Bank's failure to cope with rise in inflation, the Kazakh government should deal with this problem.

"Unfortunately, the current government has no clear plan to stabilize the situation," he said. "The government estimates the country's economic development success with GDP growth rates and the inflow of foreign investment, while GDP growth is not an objective measure per se," he added.

Spanov considers it necessary to take into account a full range of economic indicators, including the budget deficit, inflation, balance of payments for a complete picture of the country's economic development.

"Kazakhstan's domestic debt reached $25 billion. This is a very large amount when compared to the country's GDP," he said.

In 2010, Kazakhstan's GDP grew by 7.3 percent, reaching $147 billion.
The expert proposes focusing on two major stabilization measures -- increasing agricultural production and increasing the share of the processing industry.

Kazakhstan imports 80 percent of agricultural production. Domestic investment would increase in the presence of domestic production, Spanov added. Thus, the state could regulate the situation more clearly.