BAKU, Azerbaijan, Dec. 15
The National Bank of the Republic of Kazakhstan decided to keep the base rate at 9.0 percent per annum by narrowing the interest rate corridor to +/- 1.0 pp, Trend reports with reference to the National Bank of Kazakhstan.
Accordingly, the rate on constant access operations to provide liquidity will be 10.0 percent and on constant access operations to withdraw liquidity - 8.0 percent.
The decision has been stipulated by the fundamental instability in the oil market, high and weakly anchored inflationary expectations given remaining uncertainty associated with the epidemiological situation in the country and the world, as well as with the timing of mass vaccination.
Anchoring inflationary expectations is the basis for achieving the inflation target in 2021-2022. In this regard, the current level of the base rate will allow achieving the inflation target of 4-6 percent by the end of 2021.
Annual inflation in November 2020 accelerated to 7.3 percent after stabilizing at 7.0-7.1 percent in June through October 2020. The dynamics of inflationary processes continues to develop above the target band of 4-6 percent.
The food component of inflation continues to make the main contribution to the formation of inflationary processes. At the same time, international prices for grain have been growing for the fourth month in a row, which creates additional inflationary risks.
An increase in food prices, after a slight slowdown in the previous months, accelerated again to 10.8 percent in November 2020, despite a slowdown in price growth for certain types of goods, such as meat and bakery products.
The prices for sugar and sunflower oil continued to increase in November 2020 amid rising world prices.
Non-food inflation in November 2020 accelerated to 5.7 percent in annual terms. The prices for medicines continue to rise by 9.7 percent, household goods - by 7.5 percent and detergents - by 10.2 percent in connection with the pandemic.
The disinflationary effect is exerted by weak consumer demand, a decrease in real income of the population and the existing quarantine restrictions in the country.
Non-food inflation is restrained by a slowdown in the annual growth rate of prices for fuel and lubricants to 1.7 percent, as well as a shift in consumer preferences of the population towards cheaper imported goods.
The inflation of paid services in annual terms also showed the acceleration to 4.1 percent. This was facilitated by the rise in prices for both regulated (utilities) and unregulated services (hospital services, education, shoe and car repair).
In accordance with the National Bank's estimates, the seasonal annualized growth in consumer prices formed closer to the upper limit of the target corridor of 4-6 percent in August-October 2020.
However, it accelerated to 7.4 percent in November 2020, amid rising prices for certain goods (oils and fats, sugar, outerwear, thermal energy), thereby greatly exceeding the target corridor.
The inflation forecast in Kazakhstan as of 2020 has been revised downward. Annual inflation in December 2020 is expected to be in the range of 7.3-7.5 percent due to the clearer disinflationary impact of domestic demand amid repeated quarantine measures.
Nevertheless, medium-term inflation forecasts have not undergone great changes. The gradual slowdown towards the upper border of the target band of 4-6 percent will occur only by the end of 2021.
Kazakhstan’s economy decreased by 2.8 percent over 11 months of 2020. The decline in economic activity turned out to be deeper than expected.
This has been stipulated by the reduction in the production of mining industry by 3.4 percent, as well as the negative scenario of the second wave of the coronavirus.
The negative contribution of trade has continued in the service sector since the beginning of the year due to a decrease in wholesale turnover amid a decrease in export of oil and certain types of metals.
At the same time, there is an increase in retail trade due to the softening of restrictive measures in some regions.
The dynamics in transport is also in the negative zone. The sectors of construction (12.1 percent), information and communications (8.4 percent) and agriculture (5.3 percent) made a positive contribution to the dynamics of GDP.
The investment activity deteriorated in October 2020 (a decrease of 4.7 percent since the beginning of the year).
The drop in investment in the mining industry, construction and trade is partially offset by positive dynamics and sometimes by the acceleration of investments in other sectors of the real and public sectors of the economy.