Inflation - The Times Of Central Asia

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National Bank

Kazakhstan’s Central Bank Raises Base Rate to 18% Amid Surging Inflation

The Monetary Policy Committee of the National Bank of Kazakhstan has raised the base rate to 18% per annum, with a corridor of +/- 1 percentage point, in an effort to contain accelerating inflation and stabilize macroeconomic conditions. "The easing of monetary conditions amid accelerating inflation, signs of demand outpacing supply growth, and an active fiscal policy required a significant response to stabilize inflation dynamics and prevent the risk of an inflationary spiral," the central bank said in a statement. According to the National Bank, inflation in Kazakhstan is rising across all major components. Annual inflation reached 12.9% in September, surpassing expectations. Food prices remain the primary contributor (up 12.7%), while non-food inflation is also accelerating (10.8%). "Inflation expectations among the population over a 12-month horizon remain elevated and volatile, with continued uncertainty in assessments. Market professionals have revised their inflation forecasts for the year from 11.3% to 12%. External inflationary pressure remains persistent. Risks are mounting, especially from global food markets, where record price increases have been observed in categories such as meat and vegetable oils. These dynamics, coupled with active exports, are feeding into higher domestic prices," the statement noted. In response to inflation exceeding projections, the Committee opted to tighten monetary policy by raising the base rate. It also signaled that further tightening may be considered if current measures prove insufficient. Economists are raising concerns as the country enters what they describe as a "phase of expensive money." According to a recent report by the Analytical Center of the Association of Financiers of Kazakhstan (AFK), banks are hiking interest rates, margins are narrowing, and access to credit for both households and businesses is declining. After a local peak of 7.1% in the first quarter of 2025, the real interest rate dropped sharply to 3.6%. With the base rate held steady, rising inflation eroded returns on tenge-denominated assets and weakened incentives for investment. The combination of a spring rate hike and rising inflation has hit deposit rates the hardest, which are growing faster than lending rates. The spread between corporate loan and deposit rates fell from 4.1% to 3.6%, while the spread for retail products narrowed from 7.8% to 6.7%. "Banks are operating under conditions of rising funding costs. The cost of attracting funds is increasing, while returns on loans are not keeping pace. This is squeezing margins and prompting banks to adopt a more cautious lending policy," the AFK report stated. The Times of Central Asia previously reported that inflation continues to exceed official forecasts. In August, annual inflation stood at 12.2%, and it is projected to reach 14% by the end of 2025, well above the National Bank's target range of 5-6%. Economists point to Kazakhstan’s reliance on imports, including food, fuel, medicine, equipment, and consumer goods, as a key driver of inflation. Wage and pension growth have failed to keep up with rising prices.

Inflation

Experts Say Kazakhstan Must Boost Manufacturing to Tame Inflation

Inflation is steadily eroding incomes in Kazakhstan, depleting savings and undermining government efforts in the social sector. The Times of Central Asia previously noted that surging economic growth could be a contributing factor to Kazakhstan’s inflation problem. But despite rising prices, the government has no plans to apply the brakes. On the contrary, officials point to promising GDP growth driven by sectors beyond oil. Meanwhile, independent experts argue that only large-scale industrial development can provide a lasting solution to inflation. Persistent Price Pressures Inflation continues to outpace official projections. In August, annual inflation hit 12.2%, and by the end of 2025 it is expected to reach 14%, well above the National Bank of Kazakhstan’s target range of 5-6%. Economists say the country’s dependence on imports is a key driver. Kazakhstan imports large volumes of food, fuel, medicine, equipment, and consumer goods. Wage and pension increases are failing to keep pace with the surge in prices. President Kassym-Jomart Tokayev has acknowledged that high inflation poses a serious challenge, warning it is “eating away at economic growth and household incomes.” Government efforts to stabilize prices have yet to show meaningful results. On September 23, Minister of Trade and Integration Arman Shakkaliev announced that Kazakhstan will gradually phase out price controls on socially significant food products (SZPT) in favor of targeted digital support for consumers. The SZPT list currently includes 19 essential items. At the same time, Prime Minister Olzhas Bektenov instructed agencies to crack down on unjustified price hikes for basic goods, ordering strict enforcement of available price control tools. Growth at a Cost Inflation, according to Deputy Prime Minister and Minister of National Economy Serik Zhumangarin, is being fueled by economic expansion. He warned that efforts to restrain inflation could hinder growth. “Since 2023, GDP has grown by 5%, and in 2024 we grew without the contribution of oil. This year is a turning point. From 2026, oil will no longer influence GDP growth,” Zhumangarin said. Although Kazakhstan’s economy has long relied on oil revenues, the minister believes this trend is now shifting. “Economic growth is always accompanied by high inflation,” he said. “More than $12 billion in investments have already been attracted, and the target for the year is $24 billion. The government will soon announce a new strategy for economic growth. We must follow the path of Asian countries but with modern technologies.” Call for Industrialization Independent analysts argue that real progress against inflation requires mass domestic production across a wide range of goods. Political analyst Gaziz Abishev stressed the urgency of moving beyond megaprojects toward practical, infrastructure-linked industry. “Kazakhstan needs real production, not fairy-tale megaprojects. Industry tied to infrastructure, logistics, human resources, and markets solves many issues,” he wrote. “It creates well-paid jobs, stimulates small and medium-sized businesses, reduces reliance on imports, supports the tenge, and addresses budget deficits.” Abishev also called for openness to foreign industrial investment, regardless of origin. His comments appear to push back against public concerns over the influence of Russia, China, and Western...

Inflation

Inflation in Kazakhstan “Eating Away” at Incomes: Authorities Struggle for Answers

Inflation in Kazakhstan is continuing to erode household incomes, driven by the country’s dependence on imports, rising utility tariffs, and increasing tax burdens. While living costs soar, wages remain sluggish, forcing many families to allocate most of their earnings to essentials such as food, medicine, and utilities. Rising Prices, Stagnant Wages As of August, annual inflation had reached 12.2%, and experts warn it could climb even higher by year’s end. The National Bank’s original 2025 inflation target of 5% has proven to be overly optimistic. “This is a negative, sad trend. It shows that not enough measures have been taken. That it was necessary to tighten monetary policy earlier. It was necessary to contain inflation risks,” said Ramazan Dosov, chief analyst at the Association of Financiers of Kazakhstan. The National Bank’s base rate, its primary instrument for controlling inflation, currently stands at 16.5%. Financier Rasul Rysmambetov notes that the rate is unlikely to be lowered in the near future. However, high interest rates also reduce access to loans for businesses, curbing investment. Despite frequent government statements about inflation-control measures, experts argue that artificial price regulation offers only temporary relief. In his September 8 address to the nation, President Kassym-Jomart Tokayev acknowledged the severity of the issue, stating, “Today, the main problem is high inflation, which is eating away at economic indicators and household incomes. There is no ready-made solution to this problem.” Tokayev called for coordinated efforts across government agencies. At the beginning of 2025, Kazakhstan’s average monthly salary was reported at 424,200 KZT (about $800), reflecting a 24% increase over the previous year. However, this figure obscures wide regional disparities. In many areas, typical monthly salaries range between 180,000 and 230,000 KZT ($330-430). Per capita income reached 194,000 KZT ($362), up 17% from early 2023, but not enough to keep pace with inflation. According to kazkredit.kz, average families now spend up to 95% of their income on day-to-day expenses. In 2023, 52% of income went toward food; that figure has risen to more than 54% in 2025. Halyk Finance, cited by inbusiness.kz, reports that more than half of Kazakhstan’s workers earn below the national average. Salary data reveals stark income inequalities across sectors, with higher wages in mining, finance, and telecommunications, and significantly lower wages in agriculture, healthcare, and public administration. Analyst Arslan Aronov notes that although nominal wages increased by 11.3% in the second quarter of 2025 compared to the same period in 2024, real wage growth was effectively zero due to inflation. Public sentiment reflects the strain. Economists at KZTnomika reported a slight easing of inflation expectations in August 2025, but overall confidence in price stability remains low. Eighty-two percent of survey respondents reported rising food costs, with meat and dairy products leading the list. Among non-food items, medicines, clothing, and cleaning products were most frequently cited. For paid services, rising costs for housing, internet, mobile communication, and healthcare were prominent concerns. Background and Analysis Kazakhstan’s struggle with inflation is rooted in both external shocks and structural...

Growth Forecasts

ADB Raises Kazakhstan’s Economic Growth Forecast, Warns of Higher Inflation

The Asian Development Bank (ADB) has revised upward its economic growth forecast for Kazakhstan for both 2025 and 2026, while also raising its inflation projections. The updated outlook was published in the July edition of the Asian Development Outlook. Growth Outlook Strengthened According to the ADB’s latest report, Kazakhstan’s GDP is now expected to grow by 5.1% in 2025, up from the 4.9% forecast issued in April. The projection for 2026 has also been increased from 4.1% to 4.3%. Key growth sectors include: Transport: +21% Construction: +16.9% Manufacturing: +8.7% Mining: +6.1% Particular emphasis is placed on the early expansion of oil production at the Tengiz field, which launched ahead of schedule. This, combined with Kazakhstan’s increasing oil exports within the framework of OPEC+ quotas, has bolstered the growth outlook. As previously reported by The Times of Central Asia, in June, Kazakhstan raised production for the third consecutive month, contributing positively to GDP growth. "Growth in tax revenues has allowed for increased government investment in capital projects and the social sector," the ADB commented. "The early launch of the Tengiz expansion has strengthened prospects for the extractive industry. OPEC+'s May 31 decision to continue raising production supports this trend, as Kazakhstan is utilizing its full capacity." Inflation Pressures Intensify Despite the improved growth outlook, the ADB now expects inflation to reach 10.2% by the end of 2025, up from the 8.2% forecast in April. For 2026, inflation is projected at 8.4% (previously 6.5%). Data from Kazakhstan’s National Statistics Bureau indicates that annual inflation reached 11.3% in May and 11.8% in June. Paid services remain the primary inflation driver, though monthly price increases slowed modestly from 0.9% in May to 0.8% in June. The ADB notes rising inflationary pressure across the broader Caucasus and Central Asia subregion. The regional average is now expected to hit 7.8% in 2025 and 6.7% in 2026 both higher than the previous forecasts of 6.9% and 5.9%, respectively. Supporting Forecasts The Eurasian Development Bank (EDB) also anticipates robust economic expansion in Kazakhstan, projecting GDP growth of 5.5% in 2025, up from 4.8% in 2024, with sustained momentum through 2026-2027. However, the EDB likewise foresees persistent inflation, expecting it to reach 11.9% by year-end. Earlier, Deputy Prime Minister Serik Zhumangarin reported that the Kazakh economy grew by 6.2% in the first half of 2025, the country’s fastest growth rate since 2011.

Economy

EDB Forecasts Kazakhstan’s GDP Growth to Accelerate to 5.5% in 2025

Kazakhstan’s gross domestic product (GDP) is projected to grow by 5.5% in 2025, up from an estimated 4.8% in 2024, according to the Eurasian Development Bank (EDB). The forecast suggests this growth rate will be sustained through 2026 and 2027. “We expect Kazakhstan's economic growth to accelerate to 5.5% in 2025 after 4.8% in 2024, with these rates remaining unchanged in 2026-2027,” said Aigul Berdigulova, Senior Analyst at the EDB’s Country Analysis Center, during the presentation of the bank’s macroeconomic forecast. She emphasized that government initiatives to boost investment, particularly through the national holding company Baiterek, will be pivotal. Funding volumes for the economy are expected to reach KZT 8 trillion (approximately $15.2 billion), equivalent to about 6% of GDP. “This measure will help unlock investment potential in manufacturing, transport, and construction,” Berdigulova said. According to the EDB, these investment-backed policies are expected to counterbalance external shocks. Additional growth drivers include expansion at the Tengiz oil field, projected to contribute 0.4 to 0.6 percentage points to GDP growth in 2025, and ongoing fiscal stimulus, regional development efforts, and infrastructure projects. Kazakhstan ranks fourth among the EDB’s member states in terms of projected GDP growth for 2025, following Kyrgyzstan (10.3%), Tajikistan (8.4%), and Uzbekistan (6.5%). It is on par with Armenia (5.5%) and ahead of Belarus (3%) and Russia (2%). Inflation Set to Rise in 2025 Despite the optimistic growth forecast, inflationary pressures are expected to intensify. The EDB projects Kazakhstan’s inflation rate will reach 11.9% in 2025, its highest among the bank’s member countries. “Inflation in Kazakhstan is rising this year due to the weakening of the tenge observed at the end of 2024,” Berdigulova explained. She also pointed to continued increases in utility tariffs and inflation expectations amid discussions of tax and budget reforms, including a planned VAT hike. Inflation is expected to peak in the second quarter of 2026 before declining to around 8.5% by 2027. For comparison, Armenia is forecast to have the lowest inflation among EDB members at just 3.1%. According to preliminary data from Kazakhstan’s Ministry of National Economy, the country’s GDP grew by 6% year-on-year in the January-May 2025 period. However, not all institutions are as optimistic. The European Bank for Reconstruction and Development (EBRD) recently revised its 2025 forecast for Kazakhstan’s GDP downward, from 5.2% to 4.9%.

Oil Production

Kazakhstan Braces for Economic Fallout from OPEC+ Output Hike

The latest OPEC+ decision to boost oil production in a strained global market threatens to push Kazakhstan closer to recession and further inflation. On May 3, OPEC+ members agreed to a significant increase in oil output for June. Leading financial outlets, including Bloomberg, suggest that the move is intended to penalize member states that have consistently breached their production quotas, most notably Kazakhstan and Iraq. The announcement triggered a sharp drop in oil prices. Production will rise by 411,000 barrels per day in June, following a tripling of output in May from the originally planned volume. Analysts attribute the shift to Riyadh’s growing frustration with non-compliant members. According to Rystad Energy analyst Jorge Leon, a former OPEC official, Saudi Arabia aims to “financially wear down” these states while aligning with U.S. President Donald Trump’s push for lower energy prices. Kazakhstan’s Overproduction at Tengiz Despite repeated assurances from Kazakhstan’s Ministry of Energy that they would honor OPEC+ agreements, the country exceeded its January quota by 32,000 barrels per day (bpd), producing 1.5 million bpd versus an allotted 1.468 million. This surge followed Tengizchevroil LLP’s launch of a new expansion phase at the Tengiz oil field in the Atyrau region, elevating output there to 870,000 barrels per day, 45% above the 2024 average. The expansion is expected to add 12 million tons annually to Tengiz’s crude production. Tengizchevroil is a joint venture comprising Chevron (50%), ExxonMobil (25%), KazMunayGas (20%), and LUKOIL (5%). Falling Prices and Criticism of OPEC’s Tactics Following the OPEC+ announcement, Brent crude futures fell to $59.30 per barrel on May 5, with U.S. WTI at $56.19. Some analysts argue Kazakhstan is being unfairly targeted. As Reuters reports, Kazakhstan contributes only 5% of OPEC+ production and under 2% of global output. Analysts at the Stankevicius Group note that larger producers such as the UAE, Russia, and Iraq have repeatedly breached quotas without facing similar scrutiny. They argue that Saudi Arabia’s surge in production undermines the cartel’s objectives more than Kazakhstan’s actions. “Saudi Arabia, which has sharply increased its oil production, is causing even greater damage to the OPEC+ agreement by encouraging lower prices," the analysts claimed. "In other words, Kazakhstan is maintaining a balance of interests and the interests of other cartel members. Meanwhile, other members are allowing themselves to disrupt the market balance.” Planning for a Downturn Oil revenues are central to Kazakhstan’s state budget, prompting government officials to prepare for a potential downturn. Deputy Prime Minister and Minister of National Economy Serik Zhumangarin stated in April that contingency plans are being developed for scenarios where oil prices fall to $55 or even $50 per barrel. However, the national budget is pegged to a $75 per barrel benchmark. According to analyst Murat Kastaev, social obligations make spending cuts politically infeasible, leaving the government reliant on increased transfers from the National Fund and a probable weakening of the tenge. While GDP growth could slow to 3-3.5% at current prices, a sustained drop to $40-50 per barrel may trigger a recession...