The National Bank of Kazakhstan has released its latest Monetary Policy (MP) Report, outlining the country’s macroeconomic forecasts and scenarios through 2026, DKnews.kz reports. The document covers a wide range of topics, from changes in the base rate to analyzing global factors and external economic conditions. Let’s break down the key aspects of this report.
Base Rate Decision: Combating Inflation
On November 29, 2024, the Monetary Policy Committee raised the base rate to 15.25%. This decision was influenced by:
- An acceleration in annual inflation to 8.5% in October, significantly exceeding the target level of 5%.
- Increased inflationary pressures caused by rising global food prices, housing sector reforms, and heightened public expectations.
- Stable domestic demand supported by budget expenditures and wage growth.
The National Bank expects that a strict monetary policy will help stabilize inflation at the medium-term target of 5% by 2027.
Economic Development Outlook
Kazakhstan’s economy continues to grow, driven by rising domestic consumption. However, forecasts for 2024–2026 have been adjusted:
- GDP is projected to grow by 4-4.5% in 2024 and by 4.5-5.6% in 2025–2026.
- Inflation will remain above target levels despite current measures: 8-9% in 2024, 6.5-8.5% in 2025, and 5.5-7.5% in 2026.
Key Growth Factors:
- Domestic Demand. Household consumption remains the primary driver of economic growth.
- Investments. Non-commodity sectors, such as transportation, education, and communications, are developing actively.
- Exports. Increased oil production at the Tengiz field will support economic activity.
However, the decline in oil prices to $70 per barrel and high import costs pose additional risks to the balance of payments.
Global Challenges: External Assumptions
On the global stage, economic activity remains uneven. Key trends include:
- Slower growth in the EU and China due to an energy crisis and structural issues.
- Economic growth in the U.S. supported by strong consumer spending.
- Moderate but steady global economic growth, projected at 3.2% for 2024–2025.
As part of the global economy, Kazakhstan is affected by these factors through reduced external demand and inflationary pressures, particularly from Russia.
Current Macroeconomic Situation
- Inflation. The main drivers are services, especially utilities, and rising import costs due to a weaker tenge.
- Fiscal Policy. Budget expenditures accelerated in Q3 2024, particularly in education, social assistance, and transportation. However, the non-oil deficit remains high at 8.9% of GDP.
- Lending. Slower consumer lending growth is offset by an increase in loans to entrepreneurs, supporting investment demand.
Risks and Prospects
Key medium-term challenges include:
- High dependency on oil exports and price volatility.
- Persistent inflationary pressures due to domestic demand.
- Uncertainty regarding tax and fiscal policy reforms.
The National Bank’s report highlights the importance of a comprehensive approach to managing the economy amid global instability. Strict monetary policy, support for non-commodity sectors, and moderate fiscal consolidation are key tools for stabilization. However, active efforts to reduce import dependency and enhance the competitiveness of Kazakh enterprises will be necessary.
These forecasts and measures define Kazakhstan’s economic trajectory for the coming years, shaping the country’s internal and external priorities.
