Kazakhstan: Prime Minister outlines problems constraining economic growth

ASTANA (TCA) — At the meeting of the Kazakh Government on September 11, Prime Minister Bakytzhan Sagintayev listed to the National Bank two main problems that hamper the country’s economic growth — insufficient lending and high interest rates, the official website of the Prime Minister of Kazakhstan reported.

Chairman of the National Bank Daniyar Akishev said that inflation for January-August 2018 was 2.9%, which is lower than in the same period last year. According to the estimates of the National Bank, in 2018 inflation will remain in the target corridor of 5-7%.

“Inflation in 2019 will be formed near the upper boundary of the target corridor of 4-7%, that is about 6%. This is due to both the influence of external factors and to the expansion of domestic aggregate demand,” Akishev said.

Since the beginning of 2018, the National Bank’s base interest rate has been reduced from 10.25% to 9%. However, the National Bank does not exclude the tightening of monetary conditions until the end of 2018, if the estimates for inflation risks are confirmed.

It was also noted at the meeting that in the currency market, the Kazakh tenge exchange rate from the beginning of the year to September 10 weakened by 13.8% and amounted to 378.11 tenge for $1. In addition to the fall in the Russian ruble from the beginning of the year by 22%, the tenge is influenced by the factors of considerable weakening of the currencies of developing countries against the dollar.

Akishev noted that the National Bank corrects the fall of the exchange rate, when the demand for the currency is much higher than the supply, but on the whole it does not impede the fundamental trends.

At the current moment, this leads to volatility of the exchange rate, but in the long run it will provide for macroeconomic stability and maintain the balance of payments. The current situation does not pose a threat to financial stability and the situation in Kazakh banks, the chief banker said.

After listening to the report of the National Bank chairman, the Prime Minister pointed to the National Bank on two main problems hampering economic growth: lending and interest rates.

“You talk about a normal situation, but when you look at the economy branches, then agriculture, construction, communications, trade – all are in a minus. Loans are not issued. Lending has decreased. All this has an impact on the growth of the economy. The long-term loans that you issue are lagging behind and the interest rates are very high. I ask you to pay attention to this,” said Sagintayev.

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Times of Central Asia