NUR-SULTAN

Kazakhstan’s National Bank said it had kept the key policy rate unchanged at 9 percent, marking the fifth consecutive hold, after having cut it by 50 basis points in July 2020.

The rate corridor was kept at plus or minus 1.0 percentage point, the bank said in a statement.

The decision came amid the pandemic continuing to spark uncertainty, persistent domestic COVID-19 cases, tough restrictions in the EU threatening the external sector, and a worse-than-expected economic performance in January.

The National Bank explained its decision by the persistence of the effect of pro-inflationary factors, despite a slight slowdown in actual inflation.

“Risks of rising prices are associated with rising electricity tariffs, rising gasoline prices, clarifying the parameters of the state budget, continuing growth in external prices for food products, accelerating inflation in trading partner countries and the increased likelihood of a worsening situation with COVID-19 in the world against the backdrop of emerging problems with vaccination,” the bank said.

It said that there were signs of recovery in business activity, indicating a gradual recovery in demand, which was facilitated by the growth of real money incomes of the population

Annual inflation stood at 7 percent in March, down from 7.4 percent in February, but below the 4-6 percent target. The consumer price index rose by 0.62 percent month-on-month in March after a 0.65 percent rise in February.

Earlier this month, Kazakhstan has revised its economic growth forecast upwards to 3.1 percent in 2021 from a previous projection of 2.8 percent amid improved macroeconomic indicators in the first quarter of this year.

The Central Asian country’s economy contracted 1.6 percent in the first quarter of this year after shrinking 2.9 percent in January-February. The government projected it would contract by 4.5 percent in the first three months.

Manufacturing, construction, information and communications, agriculture and the public sector showed stable growth in March, while the main negative contribution to the gross domestic product’s (GDP) dynamics was made by the mining industry, trade and transport.

The National Bank projects economic growth to reach 3.4-3.7 percent in 2021.

The International Monetary Fund said earlier this month that Kazakhstan’s GDP was forecast to grow 3.2 percent in 2021 and 4.0 percent in 2022. Annual inflation is projected at 6.4 percent this year and 5 percent in 2022.

According to the World Bank’s latest projections, the country’s economic growth is expected to rebound in 2021, driven by the resumption of domestic activity, recovery in global demand for oil, continued fiscal support measures, and a successful national inoculation against the COVID-19 virus.

With the continued pace of recovery, the economy is expected to grow within the 3-4 percent range in 2021 and 3.5 percent in 2022.

Experts expect annual inflation to be at 5.9 percent by the end of 2021, while the key policy rate might be at 8.77 percent.