AERC is continuously improving the SMAF macroeconomic forecasting system for the economy of Kazakhstan. In this study, AERC presents the results of a new model for short-term forecasting of inflation in Kazakhstan using high-frequency (monthly) data.
The inflation rate in January 2023 rose by 20.7% year-on-year basis. The main drivers for increasing the overall price level were food products, which rose in price by 25.7%. In December 2022 the overall inflation was 20.3%(YoY), while monthly inflation was 1.2%.
Inflation is slowing globally. According to the IMF's January 2023 World Economic Outlook, inflation peaked in the developed and developing countries even before November 2022.
Global food inflation continues to decline.
Annual inflation slowed in Russia.
The cost of sea freight is slowing down.
Upward pressure on Kazakhstan's inflation is exerted by the dynamics of the money supply in the country. Throughout 2022, contrary to an increase in the base rate, the broad money supply in Kazakhstan did not have a sustained downward trend. For January-December 2022, the broad money supply grew at a rate of 13.9%(YoY) to the same period in 2021.
In Q4 2022, nominal salary in Kazakhstan increased by 22.9%(YoY) and by 13% compared with Q3. The high growth rate of nominal salary at the end of 2022 is due to seasonal bonus and holiday payments. This seasonal increase in nominal salary is a factor of increased consumer demand and an increase in the general price level with a slight lag.
A disinflationary factor in the medium term is the strengthening of the national currency against the US dollar since the beginning of the year.
The tenge is also supported by the continued commitment to sell foreign exchange earnings by exporters. Although the share of compulsory sales of foreign currency proceeds was reduced from 75% to 50%, this is still a factor for the strengthening of the national currency.
Taking into account the factors described above, AERC expects annual inflation in Kazakhstan to peak in February 2023 at 21.06%(YoY). At the same time, monthly inflation will continue to slow down. In March 2023, annual inflation will slow down to 17.84% annually or 0.95% monthly. The main reason for a rapid deceleration of inflation in March-April 2023 will be the "high base" of last year: In March 2022 monthly inflation jumped by 3.7%, and by 2% in April. Also, the strengthening of the national currency against the US dollar observed in January this year and the downward trend in global food prices will have an impact on the slowdown of inflation.
