National Bank raises Kazakhstan's 2018 GDP growth forecast from 2.9% to 3.5%
Four times a year the central bank conducts forecast rounds, making forecasts of the key macroeconomic indicators, primarily inflation, for the medium-term period, i.e. the next seven quarters. Based on the forecasts and estimates, it makes decisions on monetary policy, including the level of the base rate. On June 2 this year, the next forecast round "May-June 2018" was completed. The forecast period is from Q2 2018 to Q4 2019.
In line with the latest estimates of the National Bank, the economic growth rate will be 3.5 percent in 2018 and 2.7 percent in 2019. It has been clarified that in 2018, the dynamics of economic activity will be more positive amid the domestic consumer demand recovery accompanied by the growth of consumer lending. In case of a moderate slowdown in inflationary processes, it is assumed that the upward trend in the rates of real monetary incomes and wages will be maintained further.
As per the National Bank's updated estimates, in the short run, the output gap in Kazakhstan will be in the positive zone for the first time since 2014. In the medium term, it is assumed that the total output will reach its potential levels.
On the whole, the economy remains exposed to external shocks due to weak diversification. Oil prices continue to be the main factor that affects the dynamics of economic activity.
The National Bank of the Republic of Kazakhstan regards the $60/barrel oil price scenario as the baseline scenario for the entire forecast period.
According to the forecasts, in 2018, Kazakhstan's annual inflation rate will be within the target corridor of 5-7 percent, and, in 2019, it will smoothly enter a new 4-6 percent target corridor, remaining closer to the upper bound. As compared to the previous forecast round "February-March 2018", the inflation trajectory was revised upwards.
In turn, in case of the $50/barrel scenario, the annual inflation rate may reach the upper bound of the target corridor in 2018-2019, which will require an adjustment of the monetary policy.
It is to be recalled that, according to the previous estimates of the National Bank of Kazakhstan, the growth of Kazakhstan's gross domestic product was expected to be 2.9 percent in 2018 and 2.8 percent within 9 months of 2019.