People’s price surge expectations are driving inflation in Kazakhstan

Galymzhan Pirmatov, head of the National Bank of Kazakhstan, believes that as long as the country’s citizens continue to expect price surge the pressure on the inflation rate in Kazakhstan will continue.

The official made this statement on October 19 during a Q&A session with members of the parliament. He also said that the government is forecasting 7.5-9.5% inflation next year, 4-5% in 2024 and 3-4% in 2025-2027. In September 2022, the inflation rate reached 17.7%, according to the Bureau of National Statistics.

«Concerning inflationary pressure. High inflationary expectations are going to affect the inflation rate. The National Bank will continue to stick to monetary policy aimed at keeping a lid on inflation in order to prevent a wild price surge,» he said.

According to Pirmatov, all other reasons for the potential increase in inflation have already been cut by the government. For instance, the bank has increased its base rate from 9.75 to 14.5%.

He also pointed out that the inflationary pressure on food staples decreases.

«Food prices reached their peak in March and since then they have gradually decreased for six months in a row, as the UN food index shows. Moreover, the inflationary pressure has been decreasing in those countries which are key economic partners for Kazakhstan. Bank of Russia, for example, is expecting the inflation rate to decrease to 5.7% next year,» he said.

Prime Minister Alikhan Smailov noted that inflation is high in many countries including the EU member states and the U.S. where it reached 10%. Food prices are constantly surging in these regions as well, the official said. In neighboring countries, the inflation rate of 14-15% is driven by a higher price for electricity, fertilizers and food staples. Different obstacles in the field of transportation have also affected the economy. Another factor of high inflation is currency. Sharp strengthening of the Russian ruble against the US dollar has caused a price surge for Russian goods, which account for 40% of all imports to Kazakhstan.

«We have to stay targeted at lower levels of inflation and we have to do everything needed to achieve this goal. Moreover, we need to keep a lid on those inflationary expectations to prevent prices from surging even higher,» said the prime minister.

According to Smailov, the key driver of the price surge in Kazakhstan is food (55%), which is why the government has already decided to double the funds allocated to the agricultural sector. Over the first nine months of the year, the agriculture industry showed a 7% growth in output. Now, the government is going to fight price surges by facilitating logistics, introducing new antitrust and foreign trade regulations, and enforcing tougher control over a 15% cap for socially important goods. The prime minister does not doubt that the inflation rate might be reduced to 9.5-7.5% next year.

In September, the inflation in Kazakhstan reached 17.7% in annual terms. In September the rate grew by 1.8% while over the first nine months the inflation growth was 15.4%.

In October, the regulator reported that the highest rate of price surge was in the housing market due to a heavy influx of students and young Russians to the largest cities of the country.