14 September 2021, 11:14
According to the Chair of the National Bank of Kazakhstan Erbolat Dossaev, in August 2021 the situation in the external financial and commodity markets, as well as in the domestic economy, remained stable. The head of the financial regulator announced this at the government session chaired by the Prime Minister of the Republic of Kazakhstan Askar Mamin.
“Against the background of high business activity in the world, the increase in demand for goods continues to outstrip supply, which is reflected in the rise in prices. As a result, inflationary processes continue to accelerate both in developed and developing countries against the background of persisting imbalances in consumer markets,” the head of the National Bank said.
Imbalances in food markets have the greatest impact. After 2 months of deceleration in August 2021, world food prices continued to rise again. The FAO Food Price Index reached 127.4, an annual increase of 32.9%, driven by significant increases in the prices of sugar, vegetable oils and grains.
The world cereal price index rose to 129.8 due to the deterioration of the species for the wheat crop, for vegetable oils — up to 165.7 as a result of a decrease in supply and growth in demand, for sugar — to a maximum since February 2017 — 120.1 due to for droughts in Brazil.
The persisting imbalances in food markets will continue to have a negative impact on the dynamics of inflation in the world and, accordingly, in Kazakhstan. Manufacturers around the world are reporting ongoing supply problems and high prices for raw materials and finished products. Against the background of a significant increase in demand, manufacturers are faced with a shortage of key components and with an increase in commodity prices, forced to compete with each other for the ability to transport products. This has pushed freight rates to record levels as well as higher prices for exporters. The cost of shipping a container has increased 3.4 times compared to December 2019, signaling an upcoming price hike. Against this background, producer prices peaked in the US — 7.7%, in the EU — 12.2%, in China — 9%.
Due to problems with supplies and high prices for raw materials in Kazakhstan, the annual increase in producer prices in July of this year. reached 14.2%. The recovery of the economy in Kazakhstan entails an increase in the utilization of production capacities, the volume of production against the background of an increase in demand for finished products. A survey of enterprises in the real sector, conducted by the National Bank, shows an increase in demand for finished products of enterprises, which is accompanied by a sharp acceleration in prices for finished products.
The supply chain crisis is getting longer, with port congestion and container shortages continuing until mid-2022.
Inflation growth in Kazakhstan is becoming more stable. From April to August this year annual inflation accelerated from 7.0% to 8.7%. Monthly price increases were the highest for August for the first time since 2008.
Seasonally adjusted core inflation, i.e. inflation, excluding the growth in prices for vegetables and fruits, housing and communal services and energy resources, is 25% higher than the historically average values and amounts to 0.75%, indicating the formation of stable inflationary processes.
The main pressure on prices comes from food inflation, which is 51% of the aggregate consumer price index. Its growth in annual terms reached 11.4% in August of this year, having accelerated over the month by 0.4 percentage points.
There is an increase in prices for meat, vegetables, butter and sugar. The contribution of these products to the food component in May-August 2021 amounted to 2.55 pp. Among the factors behind the rise in meat prices, one can note the rise in world prices and the prices of domestic producers due to the rise in the price of feed for 7 months of this year. by 25%. The cost of forage crops is 70% of the cost of meat production.
Non-food inflation rose by 0.1 pp up to 7.3% in August. The growth of prices for fuels and lubricants continues against the background of higher producer prices and recovery in demand, which is also accelerated by the growth of prices for clothing and footwear. Their contribution to non-food inflation for May-August of this year amounted to 0.94 pp.
Inflation of paid services in August 2021 accelerated by 0.5 pp up to 6.6%. Due to the increase in ceiling tariffs, the increase in electricity prices amounted to 10.1%. Against the backdrop of a recovery in demand, prices for rental housing, catering, gas and passenger air travel rose.
“Based on the results of the forecast round, the National Bank expects inflation in the corridor of 7.5-8.5%, the lower limit of which is determined taking into account the effective implementation of the Anti-inflationary Response Package. An additional source of pro-inflationary pressure is the growth of income and consumption of the population,” Dossaev said.
The recovery in demand is confirmed by the resumption of trade as a result of growth in real incomes of the population by 1.5% in the second quarter of 2021. In turn, household consumption is growing against the background of the acceleration of wages of workers in real terms by 10.4% in the 2nd quarter of 2021.
Thus, taking into account the dynamics and factors of inflation growth, the pace of economic recovery and, accordingly, the increasing pressure from the demand side, the National Bank on Sep. 13, 2021, increased the base rate by 0.25 percentage points up to 9.5%.
In August 2021, there was an increased volatility in oil prices due to the deterioration of the risk sentiment of global investors due to signals from the US Federal Reserve about the imminent curtailment of the asset purchase program and concerns about the delta strain. Over the month, oil prices fell 4.4% to $73 per barrel. Foreign currency sales by exporters to meet tax obligations have smoothed tenge volatility amid falling oil prices. Over the month, the national currency weakened by 0.2%, to 425.42 tenge per US dollar.
“Tenge was also supported by sales within the framework of mandatory sale by subjects of the quasi-public sector and operations to convert the funds of the National Fund to make transfers to the budget. Recovery of economic activity and growth of imports by 9.2% in the first half of the year in comparison with the same period last year support the demand for foreign currency,” he said.
Assets of the National Fund at the end of August this year amounted to $56.9 billion. In August 2021, $845 million was sold to allocate targeted and guaranteed transfers for 396 billion tenge. Receipts to the National Fund in August of this year amounted to 420 billion tenge, including $506 million in foreign currency or 215 billion tenge in equivalent.
Investment income of the National Fund for August of this year developed positive and amounted to $316 million or 0.56%. The rise in stocks in August by $431 million, or 2.52%, offset the decline in bond and gold prices. The investment income of the National Fund since the beginning of the year amounted to $2.3 billion or 4.11%, mainly due to the continued growth in the stock market.
Gold and foreign exchange reserves at the end of August of this year amounted to $36.8 billion, having increased by $1.8 billion over the month. The gold portfolio grew by $134 million due to the purchase of gold under the priority right, despite the decline in the price of gold by 0.8% to $1,814 per ounce.
Assets in hard currency increased by $1.7 billion mainly due to the receipt of special borrowing rights from the IMF in the amount of $1.6 billion and the growth of correspondent accounts and deposits of STBs in foreign currency. Gross international reserves, including the assets of the National Fund, amounted to $93.7 billion, having increased by $1.8 billion over the month.
Pension assets of the UAPF at the end of August 2021 amounted to 12.9 trillion tenge, having increased from the beginning of the year by 52 billion tenge or 0.4% against the background of a decrease in the rate of withdrawals of pension savings. Thus, the monthly volume of withdrawals of funds slowed down from 643 billion tenge in February to 118 billion tenge in August, or 5.5 times.
"The number of executed applications of contributors for early withdrawal of pension savings amounted to 449.3 thousand in the amount of 1.8 trillion tenge, of which 1,765 billion tenge, or 97.9% of the total, falls on the solution of housing issues," the head of the financial regulator said.
Following the results of 8 months of this year. the profitability was provided at the level of 7.6% with inflation of 5.8%.
Since the beginning of this year, deposits in the banking system increased by 14.1%, to 25.2 trillion tenge, incl. deposits of legal entities up to 13 trillion tenge, individuals — up to 12.2 trillion tenge. Deposits in national currency increased to 16.1 trillion tenge, mainly due to retail deposits, in foreign currency — by 10.1% or 833 billion tenge, to 9.1 trillion tenge, mainly due to the corporate sector.
As a result, the level of dollarization of deposits was formed at the level of 36% in July 2021, which is the minimum value for 8 years. The dollarization of household deposits was 34.5%.
Since the beginning of this year. the loan portfolio grew by 9.5% and amounted to 16 trillion tenge. Loans to the population increased by 17.8% to 8.9 trillion tenge, loans to businesses up to 7.2 trillion tenge, incl. small business — by 12.8%, up to 2.8 trillion tenge. The cost of credit resources to the real sector of the economy fell to 11.6% from 12.0% in July 2021.
To support the economy, the implementation of the anti-crisis initiatives of the Head of State continues:
As part of the Economy of Simple Things on Sep. 10, 2021, STBs and the Agrocredit Corporation received 3,986 applications for 1.5 trillion tenge, 3,356 projects were approved for more than 1 trillion tenge, 3,260 loans were issued for 880 billion tenge.
As part of supporting enterprises in the most affected sectors under the concessional lending program as of Sep. 10, 2021, STB issued 10,884 loans worth more than 1 trillion tenge.
Within the framework of the program "7-20-25" on Sep. 9, 2021, banks approved 40,583 applications for 500 billion tenge, issued 30,706 loans in the amount of 369.9 billion tenge.
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