National Fund’s investment income for July 2021 formed positive and amounted to $590 million — Erbolat Dossaev

Business activity index in Kazakhstan decreased by 0.8 points to 50.8 due to a reduction in the service sector from 52.7 to 51.1 per related to quarantine restrictions due to the worsening epidemiological situation. At the same time, for the first time since August 2019, all sub-indices are in the positive zone. This was announced by the Chair of the National Bank of the Republic of Kazakhstan Erbolat Dossaev at the government session chaired by Prime Minister Askar Mamin.

The increase in new cases of coronavirus disease and the rate of vaccination continue to be important factors in the recovery of both the global economy and the economy of Kazakhstan. Due to the weak rates of vaccination and the increase in morbidity in developing countries, the IMF on July 27 2021 revised GDP forecast for the current year downward by 0.4 p.p. up to 6.3%. In developed countries, due to high rates of vaccination and continued incentives, the IMF expects larger growth of 0.5 pp. up to 5.6% in 2021. The forecast for global GDP remained at 6% in 2021.

With the deteriorating growth prospects of developing countries, their economies are expected to recover by the end of 2022. Nevertheless, the IMF kept its forecast for economic growth in Kazakhstan at 3.2%.

Despite the slowdown in business activity, inflationary pressures remain in the world. This trend exacerbates the imbalance between supply and demand against the backdrop of the implementation of deferred demand in combination with lengthening delivery times. The PMI delivery index in all countries is below its equilibrium value of 50 points, reflecting the lengthening of the delivery time in the world, which increases cost inflation.

According to the UN FAO, world food prices in July declined for the second month in a row and reached 123 points. At the same time, the annual growth of the FAO food price index remains at a high level, amounting to 29.1%.

Inflation in developed countries is projected to stabilize by the end of 2021, while in developing countries it will remain above the target until the end of 2022, fueled by pro-inflationary pressures from food, raw materials and weakening exchange rates.

“Inflation in Kazakhstan, after a sharp rise in June to 7.9%, continued to grow and reached 8.4% in July 2021 — the highest value since 2017. The acceleration of inflation is gaining a steady character against the background of increasing imbalances in food markets, continued growth in world prices for raw materials and a high inflationary background in the countries — the main trading partners, especially in Russia,” Dossaev noted.

More than half of the contribution to the annual rise in prices still comes from food inflation, which increased from 10.6% to 11.0% in July this year. as a result of an increase in prices for certain types of vegetables, unusual for the summer months. Rising prices for meat and vegetable oil continue to exert additional pressure.

Non-food inflation rose from 6.9% to 7.2% due to the accelerated growth in prices for durable goods and fuels and lubricants. Inflation for paid services accelerated from 5.6% to 6.1% on the back of higher utility tariffs and higher prices for certain market services.

Taking into account the significant jump in food prices, fuels and lubricants, the rise in electricity prices, stronger fiscal stimulus and heightened inflationary expectations, according to preliminary estimates of the National Bank, inflation by the end of 2021 is expected to be in the corridor of 6-7%. The updated forecasts will be presented as part of the upcoming forecast round in August-September this year.

In the context of a significant acceleration of inflationary processes to ensure price stability within the framework of the monetary policy pursued by the National Bank on July 26, 2021. decided to raise the base rate by 25 bp. up to 9.25%.

For July 2021 the tenge appreciated by 0.7% to 424.45 tenge per US dollar amid rising oil prices. Despite the volatility during July, oil quotes rose 1.6% to $76.33.

The main factors that influenced the formation of oil prices were the OPEC+ agreement on a monthly increase in production since August, as well as data on a decrease in US inventories and an increase in fuel demand. Additional support for the tenge was provided by the conversion of assets of the National Fund for the allocation of transfers, the sale by the quasi-public sector in the amount of $480 million and the conversion of foreign exchange earnings on the exchange market by exporters during the period of tax payments.

High growth rates of imports of consumer goods amid recovery in business activity continue to create increased demand for foreign currency and have a restrictive impact on the strengthening of the tenge.

“Since the beginning of August this year. pressure on the oil market increased due to uncertainties on the prospects for the global economy amid an increase in the incidence of the delta variant of coronavirus. As of August 10, the oil price decreased by 8.1% to $70.15 / barrel, and the exchange rate of the tenge was formed at the level of 425.83 tenge per US dollar, having weakened by 0.3% since the beginning of the month,’’ the head of the National Bank of Kazakhstan said.

Thus, the unstable situation in foreign markets remains. Oil volatility and changes in risk sentiment continue to put pressure on the tenge exchange rate.

Assets of the National Fund at the end of July this year amounted to $56.9 billion, having decreased by $450 million over the month for 477 billion tenge, foreign exchange assets worth $1.11 billion were sold.

Receipts to the National Fund in July 2021 amounted to 40 billion tenge, including $65 million in foreign currency. Investment income of the National Fund for July of this year developed positive and amounted to $590 million. Despite the volatility in the financial markets, the investment income of the National Fund compensated for transfers to the republican budget by one third and made up from the beginning of this year. $2 billion or 3.5% compared to $1.3 billion in the same period last year.

Gold and foreign exchange reserves in July 2021 amounted to $35 billion, having slightly decreased since the beginning of the month. The gold portfolio grew by $960 million mainly as a result of a monthly increase in the value of gold amid uncertainty about the outlook for the global economy.

Assets in freely convertible currency changed, mainly due to a decrease in correspondent accounts and deposits in foreign currency of second-tier banks by $655 million and repayment of public debt by $126 million.In general, gross international reserves amounted to $91.9 billion, having decreased by $500 million over the month.

Pension assets of UAPF for July 2021 increased by 42 billion tenge, or 0.3%, to 12.8 trillion tenge. The rate of withdrawals by citizens of part of their pension savings has slowed down by 5.3 times. The number of completed applications of citizens as of July 31, 2021, amounted to 403 thousand in the amount of 1,685 billion tenge, of which 98.2% was directed to improving housing conditions.

Investment income of pension assets since the beginning of this year amounted to 821 billion tenge. As a result, the profitability was provided at the level of 6.5% with inflation of 5.3%, for 12 months — 10.6% with inflation of 8.4%.

Since the beginning of 2021, deposits in the banking system have increased by 13.8% to 25.1 trillion tenge, incl. deposits of legal entities — by 14.5%, up to 12.9 trillion tenge, individuals — by 13.0%, up to 12.2 trillion tenge. Deposits in national currency increased by 14.3% or 2 trillion tenge to 15.8 trillion tenge, mainly due to retail deposits, in foreign currency — by 12.8% or 1.1 trillion tenge to 9.3 trillion tenge, in mainly due to deposits of legal entities.

As a result, the level of dollarization of deposits in June 2021 reached 37.0%.

To restore the economy, the implementation of the anti-crisis initiatives of the Head of State continues.

1. According to the Economy of Simple Things Program, as of Aug. 6, 2021, applications for 1.4 trillion tenge were received, 1,020 loans were issued for 726 billion tenge.

2. Under the program of concessional lending to business entities as of August 6 of this year. issued over 1 trillion tenge, incl. more than 390 billion tenge due to revolving lending.

3. According to the 7-20-25 Program on Aug. 5, 2021, applications for 811 billion tenge were received, 29.5 thousand loans were issued for 354 billion tenge.

“Non-cash transactions are becoming more and more popular among the population. For 6 months of this year their volume increased by 2.3 times compared to the same period last year to 29.8 trillion tenge. The population also continues to actively use online payments — since the beginning of this year, 83% of non-cash transactions were made through online banking,” said the Chair of the National Bank Erbolat Dossaev.

In accordance with the instructions of the Head of State, active work is underway to create the National Payment System (NPS).

A preliminary agreement has been reached with international payment systems Visa and Mastercard for processing tenge transactions in the NPS. Work has begun on reaching agreements with the international payment system Union Pay.

As part of the construction of the Instant Payment System, a platform has been developed for further testing of services and integration with second-tier banks.

The national payment system will allow to reduce the cost of instant payments by more than 2 times, to increase the share of non-cash payments from 57% to 65% by 2025.

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