BAKU, Azerbaijan, May 25. Kazakhstan's banking sector experienced a contraction in credit in March 2023 as interest rates continued to climb, impacting the country's economy, Trend reports.
According to the World Bank, the tightening of monetary policy led to a decline in aggregate credit growth by 1.2 percent year-on-year, primarily influenced by reduced loan demand from businesses.
Various factors contributed to this decline, including heightened economic uncertainty, persistent inflation, and increased financing costs. The recent slowdown in consumer lending can be attributed to the conclusion of the withdrawal of pension fund savings, which had previously stimulated demand for mortgages throughout 2022.
Moreover, March 2023 witnessed a notable rise in lending rates for both businesses and households. Interest rates for firms surged to 19.5 percent from 12.2 percent, reflecting the increased cost of borrowing for businesses. Similarly, households faced higher borrowing costs, with rates rising to 20.1 percent from 18.4 percent in the previous year.
It remains crucial for policymakers, financial institutions, and businesses to closely monitor the evolving economic landscape and explore strategies to support sustainable credit growth while managing the impact of rising interest rates.