Inflation accelerates in October, as budgetary spending catches up with amended plan

KAZAKHSTAN - In Brief 05 Nov 2024 by Evgeny Gavrilenkov

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The Bureau of National Statistics reported that in October, m-o-m inflation accelerated to 0.9% (versus 0.4% in September). Inflation y-o-y climbed to 8.5% (from 8.3% in September). Services prices grew by 14.3%, inflation in the non-food segment reached 7.8%, and food prices were up by a mere 4.9% amid a decent harvest (all numbers are October y-o-y). We mentioned in the previous notes that budgetary spending needs to grow in 4Q24 as, lacking revenues, the government delayed financing some expenditures in 9M24. On top of that, actual spending should grow even more to catch up with significantly amended regional budgets. Hence, inflation will remain elevated in 4Q24. Faster growth of the non-food and services prices indicates that the economy is becoming increasingly overheated. Even though budgetary statistics for October are unavailable yet, the National Bank of Kazakhstan hinted that budgetary spending increased last month as it sold $1.340 bln from the National Fund, i.e., much more than in any previous month of this year. The equivalent amount in KZT was allocated as transfers to the republican budget (note that the latter already exceeded the initial 2024 yearly target back in September). In addition, the NBK mentioned that last month, it also sold $253 mln from its reserves to secure a purchase of Kazatomprom shares. According to the NBK, it will sell additional FX reserves (from $130 to $140 mln) to continue purchasing these shares in November. To secure more transfers to the republican budget this month, it will sell from $1.2 bln to $1.3 bln from the National Fund. The NBK mentioned that from mid-October, it stopped FX purchases that used to offset its FX sal...