NUR-SULTAN

Kazakhstan’s National Bank kept its key policy rate unchanged at 9 percent, holding it for the sixth consecutive time since cutting it by 50 basis points in July 2020, as it sought to keep inflationary pressures in check.

The rate corridor was kept at plus or minus 1.0 percentage point, the central bank said in a statement. The rate on access operations to provide liquidity was set at 10 percent, and the rate on access operations to withdraw liquidity at 8 percent.

Persistent COVID-19 infection rates, tough restrictions in the EU threatening the external sector, and a worse-than-expected economic performance in January have clouded the outlook for Kazakhstan’s economy. Still, the National Bank explained its decision to keep rates unchanged was taken on the balance of inflation risks in the short and medium term.

“The persistence of external inflationary pressure is observed, due to the growth of world food prices and the acceleration of inflation in the countries that are Kazakhstan’s main trade partners,” the bank said in a statement.

“The process of a gradual recovery of business activity and consumer demand continues in the domestic economy.”

Consumer prices in Kazakhstan rose by 7.1 percent year-on-year in April after rising 7 percent in March. Monthly inflation in April was 0.85 percent, up from 0.62 percent in March.

Kazakhstan’s National Bank forecasts annual inflation in a range of 4-6 percent in 2021.

The economy is showing tentative signs of recovery. In April, Kazakhstan’s Economy Ministry revised the growth forecast up to 3.1 percent in 2021 from a previous projection of 2.8 percent, as first quarter indicators showed improvement. The Central Asian country’s economy shrank 1.6 percent in the first quarter after contracting 2.9 percent in January-February, less than the 4.5 percent contraction forecast by the government.

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 central bank expects economic growth to exceed government projections, forecasting expansion of 3.4 to 3.7 percent in 2021.

By comparison, the International Monetary Fund said in April 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.

The World Bank’s latest projections were also optimistic. It forecast that growth will rebound to within 3 to 4 percent growth in 2021 and 3.5 percent expansion in 2022, 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.