Kazakhstan's National Bank Maintains Base Interest Rate at 15.25%
The economy of Kazakhstan is expected to experience robust growth in the coming years, despite the challenges posed by high oil prices and monetary tightening. This optimistic outlook is based on various factors, including strong oil production, diversified economic activity, and prudent fiscal and monetary management.
In a press briefing on January 17, Timur Suleimenov, Chairman of the National Bank of Kazakhstan, announced that the base rate would remain at 15.25%. The central bank will carefully evaluate the need for additional monetary tightening measures to stabilise inflation expectations and guide inflation back onto a sustainable downward path, aiming for the target rate of 5%.
Growth has been observed in all major industries, with agriculture, construction, trade, and transport demonstrating the most significant increases. This growth has increased reserves to $45.8 billion, with $23.8 billion in gold.
The National Bank's monetary tightening measures are aimed at managing rising inflation, which currently stands at 8.6%. Inflation is projected to reach 10.5%-12.5% in 2025, before moderating in 2026. The central bank may consider easing policies once inflation moderates to the 8%-10% ranges in 2026.
Key sectors driving growth include transport, construction, manufacturing, mining, and services. The government emphasises strict fiscal discipline, efficient public spending, and investment in capital projects and the social sector to sustain growth.
The manufacturing industry also experienced accelerated growth. The weakening of the tenge has led to a rise in inflation expectations among the population, which reached 14.6% in December. To address this, Suleimenov announced the start of dollar sales as part of mirroring operations related to gold purchases. These operations are not currency interventions but aim to reduce excess money in the economy and achieve the 5% inflation target.
The rise in oil prices is attributed to various factors, including new U.S. sanctions against Russia, concerns over supply disruptions, reduced U.S. oil inventories, potential tightening of sanctions on Iran, OPEC+ production cuts, and geopolitical tensions. The National Bank uses its priority right to buy gold from local mining companies to boost international reserves and protect the economy from external shocks.
GDP growth forecasts for 2025 range between 5% and 6%, with the Asian Development Bank (ADB) projecting 5.1% growth in 2025, revised upward due to early oil production expansion at the Tengiz field and higher oil exports under OPEC+ quotas. The National Bank of Kazakhstan also raised its growth forecast to 5%-6%, supported by stronger domestic demand and increased investment activity.
In conclusion, despite the challenges of high oil prices and tighter monetary policy aiming to control inflation, Kazakhstan's economy is forecast to maintain robust growth supported by strong oil production, diversified economic activity, and prudent fiscal and monetary management through 2025 and into 2026.
Summary of projected impacts:
- Economic growth: 5%-6% GDP growth in 2025, up slightly in 2026 (around 5.4%).
- Inflation: Elevated inflation around 10%-12% in 2025, expected to moderate in 2026 with potential monetary easing.
- Oil sector: Early expansion at Tengiz and increased OPEC+ quotas lead to higher production and exports, bolstering GDP.
- Monetary policy: Tightening to control inflation is impacting the economy but is balanced with supportive fiscal policies.
- Sectoral growth: Strong growth in transport, construction, manufacturing, mining, and services.
These projections indicate a resilient economy adjusting to external price shocks and domestic monetary conditions while sustaining investment and exports.
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