In Kazakhstan, business activity index remains in growth zone for second month in a row — National Bank

At the government session chaired by Prime Minister Askar Mamin, the results of the country's socio-economic development and the execution of the republican budget for January- April 2021. Chair of the National Bank Yerbolat Dossaev reported on the results of socio-economic development and the execution of the republican budget for January-April 2021.

In April this year. the global economy continued to recover, despite the ongoing third wave of the pandemic and a record number of new infections.

According to Dossaev, the stock markets of developed countries continued to grow amid the announcement of a new plan to support the US economy by $4 trillion, and the acceleration of the growth rate of US GDP in the 1st quarter of this year of up to 6.4% and strong corporate reporting of companies. In April this year, S&P 500 index added 5.2%, Dow Jones — 2.7%, NASDAQ — 5.9%.

As a result of the improvement in the epidemiological situation, the recovery in the EU in April of this year exceeded expectations amid renewed growth in the services sector. PMI Eurozone for April of this year reached 53.8.

Against the backdrop of growth in production, demand and outstripping recovery in the service sector, the global index of economic activity in April 2021 reached an 11-year high of 56.3 points. The largest contributions to the index were made by the US, UK and Australia. In Japan, there was weak growth in economic activity, while in Brazil and India, due to an increase in the incidence of coronavirus, a decrease was recorded. In Kazakhstan, the business activity index remains in the growth zone for the second month in a row. In April this year it was 50.5 points thanks to the ongoing recovery in the service and industrial sectors.

The rise in prices in the world commodity markets, combined with the fiscal and monetary stimuli of developed countries, ensured the growth of inflation and inflationary expectations.

“Over the past year, the aggregate balance sheet of 6 key world central banks, including the US Federal Reserve, the ECB and the Bank of Japan, increased from $15 to 25 trillion and continues to grow, updating historical records,” Dossaev said.

According to the UN FAO, the food price index is growing for the 11th month in a row and in April this year. reached 120.9 points, which is the highest value since May 2014 as a result of higher prices for sugar, as well as vegetable oils, meat, cereals and dairy products. Bloomberg Grains index for stock quotes of key grain commodities in April of this year. increased by 8% — the maximum in 8 years.

Due to the rise in commodity prices and the depreciation of the EM currencies, inflation is rising above expectations in developing countries, forcing central banks to begin the transition to a neutral monetary policy.

Since the beginning of this year. a number of central banks in developing countries raised interest rates — in Brazil, Turkey and Russia. The Central Bank of Russia in April of this year again raised the key rate by 50 bp up to 5%.

In April this year, inflation in Kazakhstan remained at the level of the previous month — 7.0% with a slowdown in food inflation and acceleration of non-food and service components.

Food inflation slowed down from 10.7% to 9.8% amid slowing growth in prices for bakery products, meat, sugar and fruits and vegetables.

Against the background of the resumption of business activity, the recovery of household incomes and the growth of imports, non-food inflation accelerated from 5.6% to 6.4%. The monthly increase in prices for non-food products shows the highest value since October 2017. The growth rates of prices for clothing and footwear accelerated to 5.5% in annual terms. There is also a jump in gasoline prices since the beginning of this year by 11.6% amid a decrease in domestic supply and an increase in tariffs for the transportation of petroleum products.

As the head of the National Bank noted, inflation of paid services accelerated from 3.7% to 4.1% due to the departure from the calculation of the low base of last year in the category of regulated utilities, as well as the rise in prices for certain market services.

April 27, 2021, the National Bank decided to keep the base rate at 9% per annum with a corridor of +/- 1.0 percentage points. against the backdrop of continued action of proinflationary factors associated with an increase in external prices for food products, accelerated inflation in countries — trading partners.

The negative risk sentiment associated with an increase in COVID-19 cases in the world continues to put pressure on currencies and markets in emerging markets, including Kazakhstan. Non-residents reduced their positions in the government securities of the Republic of Kazakhstan by $248 million in April 2021.

For April of this year against the background of a decrease in investments of non-residents and volatility in external markets, the tenge depreciated by 1% to 429.02 tenge per $1.

As a result, net outflows of foreign capital from EM countries and volatility in oil prices continue to affect the exchange rate of the tenge. As of May 11 of this year, the tenge exchange rate was formed at the level of 427.22 tenge per $1.

In the 1st quarter of this year. the current account of the balance of payments formed a deficit of (-) $ 1.2 billion due to a decrease in the export of goods by 19.9% ​​or by $2.9 billion and an increase in import flows by 4.8% or by $0.4 billion to $7.6 billion.

“Imports of goods grew amid recovery in business activity and deferred domestic demand due to increased imports of consumer non-food and investment goods. The largest growth is noted in the import of goods such as cars, clothing and computers. The growth in these groups of goods in comparison with the 1st quarter of 2020 amounted to $458 million,” Dossaev said.

The assets of the National Fund at the end of April 2021 amounted to $57.6 billion, having increased by $530 million over the month.

In April this year, to ensure the allocation of targeted and guaranteed transfers for 333 billion tenge, $788 million was sold.

Investment income of the National Fund for April of this year. amounted to $1.1 billion or 2%, while the growth of the portfolio of shares amounted to $734 million, the portfolio of bonds $278 million and gold by $106 million.

The investment income of the National Fund amounted to $940 million or 1.7%, mainly due to the recovery in the bond market in April of this year and growth in the stock market.

Gold and foreign exchange reserves at the end of April of this year amounted to $34.2 billion, having increased by $689 million over the month.

The growth of the gold portfolio by $1.3 billion amid a 5% recovery from $1.685 to $1.769 per ounce compensated for the decline in assets in hard currency. In May of this year. continued growth in the price of gold, amounting to $1841 per ounce on May 11.

Assets in freely convertible currency decreased in April of this year by $635 million, including due to a decrease in the volume of customer deposits in the National Bank by $472 million and payment of the state debt by $88 million.

Thus, gross international reserves in April 2021 amounted to $91.8 billion, an increase of $1.2 billion.

Pension assets of the UAPF since the beginning of this year. decreased by 0.3 trillion tenge or 2.3% to 12.6 trillion tenge due to early withdrawal of funds by the population.

According to Dossaev, the amount of accrued investment income from the beginning of this year amounted to 488.5 billion tenge. Following the results of 4 months of this year a yield of 3.8% was obtained with an inflation rate of 2.7%. Real profitability is provided as a result of investment activities, as well as market and exchange rate revaluation of pension assets.

On May 11the number, 2021, of executed applications of contributors for early withdrawal of pension savings amounted to 266.8 thousand in the amount of 1.3 trillion tenge. At the same time, there is a decrease in the volume of monthly withdrawals of pension charges: 643.4 billion tenge in February, 302.1 billion tenge in March, 283.0 billion tenge in April 2021.

99.4% of the withdrawn savings are directed to the solution of housing issues. 4.7 billion tenge was used for treatment, pension savings of 1,478 citizens in the amount of 3.4 billion tenge were transferred to trust management in 4 management companies.

In the context of regions, the Mangystau region, the cities of Almaty and Nur-Sultan account for 58.4% of the total volume of seizures.

Deposits in the banking system since the beginning of the year have increased by 5.8% to 23.4 trillion tenge, incl. in national currency — by 6.5% or 896.1 billion tenge to 14.8 trillion tenge, in foreign currency — by 4.8% or 392.5 billion tenge to 8.6 trillion tenge.

As a result, the level of dollarization of deposits was formed at the level of 36.9% in March 2021.

Deposits of legal entities in January-March 2021 increased by 5.3% to 11.9 trillion tenge, individuals — by 6.4% to 11.5 trillion tenge.

Loan portfolio as of April 1, 2021, amounted to 14.8 trillion tenge, having increased since the beginning of this year by 1.2% or 169.6 billion tenge.

The cost of credit resources to the real sector of the economy fell to 11.5% compared to 12.5% ​​in March last year.

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

  • Under the Economy of Simple Things Program as of May 6, 2021, the second-tier banks received 1,507 applications for 1.18 trillion tenge, 961 projects were approved for 785.2 billion tenge.
  • Under the Program of Concessional Lending to Business Entities, as of May 6, entrepreneurs submitted 3,031 applications for 755.3 billion tenge, of which 2,205 applications for 596.8 billion tenge were approved, 8,272 loans for 837.5 billion tenge were issued, incl. 3,606 loans for 265.2 billion tenge at the expense of money received from the repayment of previously issued loans.
  • Under the 7-20-25 program, as of May 6, 2021, 59,070 applications for 709.3 billion tenge were received, 34,573 applications for 416.9 billion tenge were approved.
  • Under the Baspana Hit market mortgage program, as of May 6, 2021, 127,578 applications for 1.2 trillion tenge were received, 69,099 applications for 651.6 billion tenge were approved.

On May 5, 2021, the National Bank published the Digital Tenge report for public discussions and a comprehensive study of the benefits and risks, defining the tasks solved by digital currency, the method of their emission and distribution, the technology used, the impact on monetary policy, financial stability and the payment services market.

The report highlighted the issues of the technological and economic nature of the digital currency, the approaches of the National Bank to the research and implementation of the digital tenge, a preliminary assessment of potential effects, as well as a description of the pilot project.

Based on the results of the study of potential effects from the implementation, the results of the pilot project and discussion with stakeholders, a decision will be made on the need to introduce digital tenge and a roadmap will be developed. The pilot project will be implemented in the second half of 2021.

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