In October, the annual inflation rate rose to 8.5%, driven by the increase in regulated tariffs under the "Tariff in Exchange for Investments" program, the weakening of the tenge, and high domestic demand. Additional pressure came from fiscal stimulus due to the underperformance of the budget's revenue side. Although inflation expectations among the population have slightly decreased, they remain unstable.
External factors are also impacting the economy. Despite a general slowdown in global inflation and easing labor market tensions, there is a rise in world food prices and volatility in financial markets. Fluctuations in exchange rates and high inflation in Russia are creating further inflationary pressures.
The National Bank has revised its baseline scenario for Brent crude oil prices to $70 per barrel, taking into account the decline in demand from China, the slowdown in the global economy, and increased production in North and South America. Kazakhstan's economic growth is projected to be between 4-4.5% in 2024, with a subsequent increase to 4.5-5.6% in 2025-2026. However, economic growth is constrained by the mismatch between rising domestic demand and supply capabilities, which continues to intensify inflationary pressures.
Inflation forecasts for the coming years have also been revised: it is expected to be 8-9% in 2024 and to drop to the target level by 2027. Nevertheless, inflation risks remain high. This is linked to fiscal stimulus, reforms in the housing and utilities sector, the weakening of the tenge, and external inflationary pressures. The liberalization of prices and tariffs, along with uncertainty in stabilizing public finances, continue to create additional risks.
Against the backdrop of increased volatility in financial and energy markets, the National Bank has raised the base rate to curb inflationary pressure and achieve stable price growth moderation. The committee will closely monitor further changes and tighten monetary policy if necessary. The next decision on the base rate will be announced on January 17, 2025.