At the government session chaired by Prime Minister Askar Mamin, Chair of the National Bank Erbolat Dossaev reported on the results of the country's socio-economic development for January-May 2020.

According to him, in May 2020 positive sentiments prevailed on foreign markets, associated with a decrease in the increase in the incidence of coronavirus in many countries and their gradual withdrawal from quarantine. The weakening of quarantine measures contributed to the resumption of economic activity and energy demand.

Oil quotes for May 2020 increased by 39.8% from $25.3 to $35.3 per barrel against the background of a gradual equalization of the balance in the oil market due to the implementation of the OPEC + agreement to reduce oil production. As of June 8, 2020, oil on world markets closed at $40.8 per barrel.

Expectations in global markets are supported by quarantine measures in many countries and, as a result, improving statistics, in particular from China, the USA and the EU. So, the Global PMI Manufacturing index in May 2020 increased from 39.6 to 42.4. The decline slowed down in all respects - output, new orders, new export orders and employment.

“We see signs of some recovery in the economy of Kazakhstan on the basis of the Business Activity Index, monthly assessed by the National Bank. According to a survey of 447 large, medium and small enterprises in industry, construction and the service sector, the index of business activity increased in May this year up to 44.0 points compared with 37.2 points in April, but continues to remain below the mark of 50 points. The most noticeable improvement was observed in the service sector, where the index grew from 34.7 to 42.8. The index of business activity in construction amounted to 42.1 (in April this year 36.3), in industry — 46.9 (42.1),” noted Dossaev.

Annual inflation in May 2020 amounted to 6.7%, prevailing above the target corridor of 4-6% for 2020.

The annual increase in food prices accelerated to 10.7%, which is the highest since October 2016, and continues to make the main contribution to inflation. Monthly growth remains high, however, it slowed down to 1.2% after peak values ​​in March-April 2020. (1.7-1.9%) against the background of stabilization of the growth rate of prices for certain food products: for meat and meat products a slowdown to 1.3% (from 1.6% in April 2020), for cereals — to 2 % (3.4%). Sugar has fallen in price by 1.2% (in April of this year — an increase of 6.2%), vegetables fell in price by 1.9% (in April of this year — an increase of 3.1%).

The annual increase in prices for non-food products slowed down to 5.3% with a continuing decline in prices for fuel and lubricants (gasoline and diesel fuel — by 0.7%).

“The annual inflation of paid services fell over the month from 3.5% to 3% due to a temporary reduction in tariffs for regulated utilities in a state of emergency. In May 2020 tariffs decreased by 3%, in annual terms — by 1.9%. According to our estimates, annual inflation in this year will be higher than the target corridor of 4-6% and according to the baseline scenario, providing $35-40 per barrel of Brent crude oil, will be 8.0-8.5%. In 2021, with the exhaustion of the effect of transferring the exchange rate to domestic prices and stabilization of the situation in the domestic economy, annual inflation will gradually slow down to the upper limit of the target corridor,” said the chair of the National Bank of Kazakhstan.

Against this background, the National Bank June 8, 2020, retained the base rate at 9.5% with an interest corridor of +/- 2 pp.

In May 2020, the domestic foreign exchange market developed under the positive influence of external and internal factors. The increase in oil prices had a favorable effect on the currencies of the countries — trade partners of Kazakhstan. Russian ruble for May 2020 strengthened by 5.7% to 70.14 rubles per US dollar, the euro — by 1.3% to 1.11 US dollars per euro.

Additional support to the national currency was provided by the planned sales of currency from the National Fund with the aim of allocating a guaranteed transfer to the republican budget.

“Over the past month, measures continued to be taken to compulsory sale of part of the foreign exchange earnings by the quasi-public sector companies. Sales volume in May 2020, CGS entities amounted to $156 million per month. The increase in world oil prices, coupled with favorable internal factors, contributed to the strengthening of the tenge exchange rate for May 2020 by 3.1% from 424.57 to 411.55 tenge per US dollar. Following the auction on June 8, 2020, the average rate was at the level of 397.27 tenge per US dollar,” said Erbolat Dossaev.

According to preliminary estimates, the current account of the balance of payments for the 1st quarter of this year formed with a surplus of $1.2 billion against the backdrop of an increase in the surplus of the trade balance to $6.9 billion. Export of goods increased by $581 million, which was associated with an increase in oil and gas condensate exports by 18.5%, mainly due to an increase in quantitative deliveries by 13.8% according to previously concluded contracts. Imports of goods decreased by $148 million as a result of a reduction in cross-border trade due to the introduction of a ban on individuals crossing the border.

According to preliminary data, the gold and foreign exchange reserves of the National Bank in May 2020 increased by 3.1% or $950 million to $31.5 billion due to an increase in the foreign currency reserves of gold reserves as a result of an increase in the foreign currency accounts of the second-tier banks with the National Bank by $600 million. The gold portfolio decreased slightly by $137 million due to the sale of gold worth $250 million in the National Fund and a slight increase in the price of gold from $1,717 to $1,726 an ounce.

Assets of the National Fund in May 2020 did not change significantly from the previous month and amounted to $58.5 billion. In May 2020, 650 billion tenge was allocated from the National Fund to the republican budget in the form of a guaranteed transfer, which is equivalent to about $1.6 billion.

“To allocate a guaranteed transfer in May 2020, $1.1 billion of foreign currency was sold from the National Fund. Foreign exchange earnings of $384 million and investment income of $670 million received as a result of a partial restoration of the stock market in May 2020, offset sales from the National Fund. Gross international reserves increased over the month by 1% to $90 billion,” the chair of the National Bank emphasized.

The volume of deposits at the end of April 2020 amounted to 19.6 trillion tenge, having increased by 3.3% since the beginning of the year due to the growth of both foreign currency and tenge deposits.

Deposits in national currency increased by 2.8% (or by 301 billion tenge), in foreign currency — by 4.0% (or by 328 billion) tenge. Excluding exchange rate revaluation, foreign currency deposits decreased by 6.3% or $1.3 billion. As a result, the dollarization level of deposits amounted to 43.4% in April 2020, (43.1% in December 2019). In May 2020, dollarization of deposits decreased to 41.8%, according to preliminary estimates as of May 29.

Loans to the economy since the beginning of the year increased by 1.4% (or by 187.7 billion tenge) to 14.1 trillion tenge at the end of April 2020 as a result of the growth of long-term loans by 1.8% or 216.5 billion tenge to 12.0 trillion tenge. Short-term loans decreased by 1.4% (or 28.8 billion tenge) to 2.0 trillion tenge.

The rate on tenge loans of legal entities decreased from 12.5% ​​in March up to 12.1% in April of this year, including for short-term loans — up to 12.0% (12.4%), for long-term loans the rate slightly increased to 13.3% (13.1%).

As part of supporting the economy, the implementation of the anti-crisis initiatives of the Head of State continues.

1. Under the program of preferential lending to SMEs affected by the imposition of a state of emergency, on June 4, 2020, entrepreneurs filed 2,041 applications for 494.4 billion tenge, 1,467 applications for 197.6 billion tenge were issued.
2. Under the Economy of Simple Things Program, as of June 5, 2020, banks approved 526 applications totaling 305.1 billion tenge, 422 loans worth 210.4 billion tenge were issued.
3. According to the program 7-20-25, on June 4, 2020, 18,769 applications for 216.5 billion tenge were approved, of which 15,556 loans worth 183.9 billion tenge were issued.
4. According to the market-based mortgage program Baspana Hit on June 4, 2020, 29,324 applications for the amount of 244.4 billion tenge were approved, 24,277 loans worth 198.0 billion tenge were issued.