BAKU, Azerbaijan, April 5. Kazakhstan is consistently moving towards the goal of reducing inflation to 5 percent in the medium term, Trend reports.
As it became known on April 1, annual inflation continued to decline last month (March). The downward trend has been continuing for several months in a row.
Thus, annual inflation in March amounted to 9.1 percent, which is 0.2 percent lower than in February (9.3 percent). Monthly inflation also decreased and amounted to 0.7 percent, down from 1.1 percent in February.
The largest increase in prices in the past months in annual terms was observed for paid services - by 13.2 percent (in February - 12.8 percent), then for non-food products - by 8.2 percent (in February - 8.5 percent). The lowest growth was recorded for food products - by 6.9 percent (in February - 7.4 percent).
At the same time, the largest increase in prices among food products was recorded for rice (22.7 percent) and eggs (19 percent), among non-food products - for locally assembled cars (16.8 percent), pharmaceutical products (11.3 percent), diesel fuel (15.1 percent), gasoline (13.6 percent), and liquefied gas in cylinders (13 percent).
For paid services, the increase in prices for cold and hot water exceeded 30 percent, and for electricity - 26.1 percent.
In turn, the National Bank of Kazakhstan (NBK) continues to work in various areas to systematically achieve the goal of reducing inflation to 5 percent by 2026.
As the National Bank told Trend, the regulator remains committed to gradually reducing and stabilizing inflation through its base rate adjustments. These decisions are carefully made by analyzing macroeconomic data and forecasts.
Simultaneously, the National Bank emphasized its ongoing efforts to enhance communication strategies aimed at managing economic agents' expectations proactively. This, in turn, is expected to facilitate a clearer understanding of the future trajectory of monetary policy within the market, thereby fostering a predictable environment for both businesses and the general population.
Furthermore, the regulator disclosed its intentions to maintain close collaboration with the government and other relevant agencies. It underscores the importance of coordinated efforts to achieve low and stable inflation, which encompasses broader economic policies, including fiscal strategies.
The reduction in inflation in Kazakhstan is also facilitated by the gradual return of inflation in Kazakhstan’s trading partner countries to their target values, as well as the general trend towards a decrease in world food prices.
The gradual return of inflation in Kazakhstan’s trading partner countries to their target values, as well as the general trend towards a decrease in world food prices, also contributes to a reduction in inflation in Kazakhstan.
For example, inflation in Kazakhstan’s largest trading partners has slowed down significantly over the past two years.
Thus, in China, inflation in 2022 was 2 percent and then decreased to 0.2 percent in 2023.
Russia also recorded a decline. Inflation in Russia was 11.94 percent in 2022, and it decreased by as much as 4.5 percent and amounted to 7.4 percent in 2023.
At the same time, in Italy, which is Kazakhstan's largest trading partner in the EU, inflation in 2022 was 8.1 percent, while already in 2023 it fell to 5.7 percent.
In addition to this, global food prices are also falling. According to the FAO, global food prices fell by as much as 13.7 percent in 2023. Global food prices continued a sequential decline for the seventh month in a row (latest data for February 2024).
The NBK told Trend that under the base scenario, inflation at the end of 2024 is projected at 7.5-9.5 percent, with a decrease to 5.5-7.5 percent by the end of 2025.
The National Bank also noted that the slowdown in inflation in the medium term will continue against the backdrop of moderately tight monetary conditions and, as a result, the stabilization of inflation expectations.
In addition to the above points, a further decrease in inflation in 2024 will enable the National Bank to consider the feasibility of further reducing the base rate while adhering to moderately tight monetary conditions.
Notably, the base rate also continues to be gradually reduced against the backdrop of lower inflation. Thus, in 2024 alone, the base rate was lowered twice - from 15.75 percent to 15.25 percent in January and from 15.25 percent to 14.75 percent in February. The next decision on the base rate is expected on April 12, 2024.
If we take into account that inflation continued to decline after the last decision on the base rate, then it can be expected that the National Bank of Kazakhstan will once again lower the rate. And this, in turn, will indicate the National Bank’s expectations to reduce inflation.
Forecasts of major international financial institutions also indicate that Kazakhstan can achieve target inflation in the medium term - until 2026.
Thus, according to the World Bank forecast, at the end of 2024, inflation in Kazakhstan will be 8 percent and will continue to decline in 2025, amounting to 6.7 percent. In 2026, inflation will almost reach the target value of 5.6 percent.
In turn, the International Monetary Fund also predicts a gradual decline in inflation (the latest forecast). The IMF expects that at the end of 2024, inflation in Kazakhstan will be 7.7 percent; in 2025 - 6.2 percent, which is already considered close to the target range. There is no IMF forecast for 2026 yet.
In addition, Standard & Poor's ratings agency expects inflation in Kazakhstan to average 8 percent in 2024, down from nearly 15 percent in 2023, and gradually decline to the NBK's target by 2026.
There are also a number of reasons that may prevent inflation from decreasing in the future and lead to its growth.
This may include an increase in population demand for goods. That is, it is the purchase of huge quantities of certain goods, which leads to their shortage and higher prices. A reduction in supply may also contribute to rising inflation. If, for various reasons, including low harvests, reduced imports, etc., there is a shortage of basic goods, this leads to an increase in prices.
In addition, a fall in the exchange rate of the tenge against the dollar could hinder Kazakhstan’s inflation plans. Since 2015, Kazakhstan has canceled the currency corridor and moved to a freely floating exchange rate, which means that the tenge exchange rate can change daily. But the results of 2023 show that the tenge, although slightly weak, has strengthened against the dollar.
However, according to the above statements of the National Bank of Kazakhstan, the regulator is taking and will continue to take measures to prevent inflation from rising and to achieve the goal by 2026.
At the same time, forecasts from international financial institutions indicate that Kazakhstan’s medium-term inflation target is quite objective. In addition, the possibility of achieving it is also supported by low inflation in Kazakhstan’s largest trading partners, China, Russia, and Italy, as well as a consistent decline in global food prices. In view of all these factors, it can be predicted that reducing inflation in Kazakhstan to the target by 2026 is quite achievable.