EBRD forecasts deceleration of Kazakh economy's growth rate

Finance Materials 1 November 2018 16:41 (UTC +04:00)

Baku, Azerbaijan, Nov. 1

By Rashid Shirinov – Trend:

The growth rate of Kazakhstan’s economy is projected to decelerate somewhat to 4 percent in 2018 and 3.5 percent in 2019, says the November report by EBRD titled Regional Economic Prospects in the EBRD Regions.

The reasons for this are slower additional gains from oil output and a weak average real income growth due to inflation, the report says.

“However, the foreseen substantial increase in the minimum wage will underpin private consumption to some degree. Ongoing fixed investment in the oil and gas sector will also likely support economic growth,” the EBRD noted.

The report also reads that real GDP growth in Kazakhstan accelerated to 4.1 percent both in 2017 and in the first three quarters of 2018 from 1 percent in early 2018.

“The economy grew strongly due to increased oil production and favorable oil prices. The oil output expanded by 10.5 percent in 2017 and by 6.6 percent year-on-year in January-September 2018,” the EBRD stated.

The document also notes that the Kazakh tenge came under some pressure in 2018 despite rising oil prices, resulting in a weakening against the US dollar by 8.5 percent during the first nine months of 2018.

“This contributed to some acceleration of inflation in the third quarter of 2018. At 6.1 percent in September 2018, inflation is still within the central bank’s target of 5-7 percent,” the report reads.

The EBRD reminded that the National Bank of Kazakhstan intervened in the foreign exchange market in September 2018 and also raised the base rate from 9 to 9.25 percent in October 2018, reversing a series of rate cuts since May 2016. Banking sector imbalances surfaced as the central bank deprived three smaller banks of their licenses and provided liquidity support to the second largest bank in September 2018, the reports says.