Inflation fueled by credit remains elevated as it climbs y-o-y amid m-o-m moderation

KAZAKHSTAN - In Brief 03 Jun 2025 by Evgeny Gavrilenkov

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The Bureau of National Statistics reported that inflation rose to 11.3% y-o-y in May from 10.7% y-o-y in April. Even though it reached a "mere" 0.9% versus 1.2% in April m-o-m, inflation m-o-m appears higher than a year ago. Services prices grew in May by 16.0% y-o-y (up from 15.7% y-o-y in April), while y-o-y food inflation jumped to 9.6% (up from 8.5% in April). Non-food prices also climbed in May - to 9.0% from 8.9% (both y-o-y). The National Bank of Kazakhstan recently reported that corporate credit (to non-government entities) continued to grow rapidly, with their growth accelerating to 2.5% month-over-month (m-o-m) last month. Household credit also posted accelerated m-o-m growth – to 2.1%. In April, credits in both segments grew by 1.6% m-o-m. The NBK also revealed that state and quasi-state interventions on the FX market remained meaningful. The NBK sold almost $1.0 bln from the National Fund on the FX market last month (22% of the entire market turnover). Even though the regulator announced that KZT213 bln has been sterilized by its “mirroring” reverse operations (and the same KZT213 bln should return to the FX market to compensate for May’s operations), the FX market appears strongly affected by the state and quasi-state entities. Mandatory FX sales by the latter reached $356 mln, while the NBK also revealed that it purchased $250 mln to rebalance assets of the State Pension Fund. In June, the NBK is going to sell from $700 mln to $800 bln from the National Fund to secure transfers to the republican budget. Even though the tenge remained relatively stable amid all these FX interventions in May (having fluctuated from USD/KZT 505 to USD/KZT 515), inflation sti...