Inflation in Kazakhstan was 13.1% in August 2023 compared to August 2022. The monthly consumer price index rose in August for the second month in a row and amounted to 0.7% compared to 0.6% in July and 0.5% in June. The increase in monthly inflation in August is still associated with the summer increase in prices for utilities. Thus, in August alone, sewerage services increased in price by 18%, cold water - by 13.1%, hot water - by 7.8%, electricity - by 6.7%. According to the BNS, in annual terms prices for food products increased by 12.4% (in July 2023 - 13.5%), for non-food products by 13.5% (in July 2023 - 15%), for paid services - by 13.9% (in June 2023 – 13.6%).
Inflation estimate in Kazakhstan in September 2023
The AERC revised its previous inflation estimate for September to a slight increase. Thus, AERC forecasts the inflation rate in August at 11.94% (y/y) or 0.72% (m/m) versus 11.82% (y/y) and 0.66% (m/m) in the previous review. The slight increase in the forecast is due to the continued increase in the level of monthly inflation and the high rate of growth in prices for utilities.
Inflation forecast for October 2023
AERC forecasts October inflation at 10.94% (y/y) or 0.72% (m/m). AERC's current forecast is higher than the previous inflation estimate: 10.74% (YoY) or 0.66% (MoM). The acceleration in monthly inflation in October is associated with the expected acceleration of inflation in Russia, which remains a key importer of Kazakhstan. At the same time, high oil prices support the weakening exchange rate of the national currency. However, the cancellation of the sale of foreign currency by the quasi-public sector has a negative effect on the tenge exchange rate, which, other things being equal, makes imports more expensive and has a positive effect on inflation.
AERC, taking into account the analyzed factors, considers a further reduction in the base interest rate to be premature in Kazakhstan. Monthly inflation accelerated for the second period in a row. The population's inflation expectations for inflation in the next 12 months, according to surveys in August, decreased compared to July to 16.4%, but remain elevated. Perceived inflation over the last 12 months is at 18.4%. Against this background, the ADB also earlier raised its inflation forecast in Kazakhstan for 2023. All this currently prevents monetary policy easing.
