Wednesday, 09 September 2020, 10:25:12
Chair of the National Bank of Kazakhstan Erbolat Dossaev, at a government session chaired by Prime Minister Askar Mamin, reported on the main results of the development of the banking system following the results of 8 months of the current year.
As Dossaev noted, world financial markets were growing in August this year, followed by a correctional decline in early September 2020 due to the sale of shares of companies in the technology sector and a slowdown in the recovery of the US labor market.
“In August 2020, the stock indices of developed countries MSCI World and developing countries MSCI EM won back the March drop amid expectations of the imminent development of a vaccine against COVID-19, signals from the Fed to maintain soft policies and a smooth recovery of the global economy. However, at the beginning of September this year, the rally in the market for shares of the technological sector was replaced by a sell-off, which pulled shares along the entire spectrum of the stock market,’’ said the chair of the National Bank.
In general, investors are preparing for increased instability in the fall due to the consequences of the coronavirus pandemic, as well as the US presidential elections in November 2020.
In August this year, against the background of a decrease in rates and the dollar index against a basket of currencies, the demand for defensive assets increased, first of all, for gold, the price of which for the first time in history overcame $2,000 per troy ounce.
Last month, oil rose in price by 4.6% to $45.3 per barrel. However, already at the beginning of September this year, it is losing ground due to the continuing surplus of oil on the markets. As of this morning, the price of brent crude oil fell below $40 per barrel and amounted to $39.8.
“The demand for oil is gradually increasing, as evidenced by the ongoing recovery of the industrial sector in the world. Thus, the Global Manufacturing PMI rose from 50.3 in July to 51.8 points, the index of business activity in industry (PMI) in China - from 52.8 to 53.1 points,” Dossaev noted.
In Kazakhstan, the business activity index, after a decline in July this year, associated with the imposed restrictive measures, slightly increased in August from 44.7 to 45.4 points.
The improvement in the index in services and industry was accompanied by a decline in construction.
The slowdown in consumer demand in Kazakhstan and the expected decline in food prices on world markets have a disinflationary effect.
In August this year, annual inflation fell from 7.1% to 7% due to a decrease in the food component.
For the first time in the last 2 years, a monthly deflation of 0.2% was recorded in the group of food products. Along with the seasonal decline in prices for fruits and vegetables, there was a significant slowdown in the growth rates of prices for meat products, bakery products and cereals, eggs.
The annual increase in food prices slowed to 10.9%, compared with 11.3% in July 2020. The annual growth in prices for non-food products amounted to 5.5% with a continuing decrease in prices for fuels and lubricants (gasoline and diesel fuel by 0.1% in August), and the prices of paid services in annual terms accelerated from 3.2% in July to 3.4% in August this year against the backdrop of rising tariffs for utilities and transport services.
In order to maintain control over the dynamics of inflationary processes and ensure a smooth deceleration of annual inflation in the medium-term horizon, the base rate has been kept at 9% since September 8, with an interest rate band of +/- 1.5 percentage points.
In August of this year, support for the national currency was provided by rising oil prices, as well as the conversion of assets of the National Fund within the framework of the allocation of a guaranteed transfer to the republican budget and extended measures for the mandatory sale of a part of export foreign exchange earnings by companies of the quasi-public sector.
At the same time, the currencies of developing countries continue to weaken relative to developed countries. The Indonesian rupee weakened over the month by 1%, the Russian ruble — by 1.6%, the Brazilian real — by 2.3%, and the Turkish lira — by 6%. In general, the index of currencies of developing countries in August rose by only 0.2%, while the index of currencies of developed countries added 2.9%.
The Kazakhstani tenge among the currencies of developing countries showed the smallest depreciation by 0.5% over the month — from 418.0 to 420.11 tenge per US dollar.
Against the background of further weakening of the currencies of developing countries due to a decrease in investor interest in risky assets, a decrease in oil prices due to a weakening of optimism about the recovery in oil demand, the tenge exchange rate since the beginning of September has weakened by 0.8% to 423 , 54 tenge per US dollar as of Sep. 8, 2020.
“The exacerbation of the trade conflict between the US and China, the likelihood of a second wave of coronavirus remain risks for emerging market currencies. In addition, the strengthening of the sanctions rhetoric against Russia, coupled with the policy of reducing the sale of foreign currency within the framework of the budget rule, increases the risks of a weakening of the ruble, which will also negatively affect the exchange rate of the national currency,” said the chair of the National Bank.
The situation in the money market remains stable with a decrease in the liquidity surplus over the month by 11.3% to 3.7 trillion tenge. The target money market rate TONIA is formed within the interest rate corridor, having formed in August this year at the level of 9.2%.
In August this year, as part of the development of the government securities market, the international settlement line between the local and international (Clearstream) securities depository was improved to the Delivery versus Payment type.
“This means a transition to a new level for the domestic financial market, which allows to reduce the risks of global investors when entering the government securities of Kazakhstan. In conditions of competition for capital flows, this creates an advantage for the local stock market in comparison with similar markets,” Dossaev said.
Gross international reserves at the end of August 2020, according to preliminary data, amounted to $94.1 billion, an increase of 0.5%.
The gold and foreign exchange reserves of the National Bank did not change in August, amounting to $35.4 billion. The inflow of funds to the foreign currency accounts of STBs was largely offset by the payment of the state debt.
The assets of the National Fund amounted to $58.7 billion, having increased by $0.5 billion over the month due to the investment income received in August of this year in the amount of $1 billion.
Deposits in the banking system at the end of July this year amounted to 20.7 trillion tenge , having increased since the beginning of the year by 8.7% due to the growth of tenge deposits by 15.6% to 12.5 trillion tenge.
Foreign currency deposits decreased by 0.2% to 8.2 trillion tenge.
As a result, the level of dollarization of deposits for 7 months of 2020 decreased to 39.5%.
Loans to the economy since the beginning of the year have increased by 0.5% to 13.9 trillion tenge at the end of July this year as a result of the growth of long-term loans by 0.8% or 98.5 billion tenge to 11.9 trillion tenge.
Short-term loans decreased by 1.5% or 31.3 billion tenge to 2 trillion tenge.
Since the beginning of the year, the business loan portfolio has decreased by 1% to 7.1 trillion tenge, and the loan portfolio of the population increased by 2.1% to 6.8 trillion tenge. In the structure of the portfolio of household loans, consumer loans since the beginning of this year have decreased by 1.4% to 4.2 trillion tenge, mortgage loans have increased by 11.1% to 2 trillion tenge.
The rate on tenge loans to businesses amounted to 11.9% in July of this year, incl. for short-term loans — 11.7% (11.8%), for long-term loans — 13.6% (12.8%).
As part of supporting the Kazakh economy, the implementation of the anti-crisis initiatives of the Head of State continues.
- Under the Economy of Simple Things program, as of Sep. 4, 2020, banks approved 731 applications for a total amount of 538.8 billion tenge, issued 604 loans for the amount of 315.7 billion tenge.
- Under the Program of concessional lending to SMEs affected by the introduction of the state of emergency, as of Sep. 4, 2019, entrepreneurs submitted 2,263 applications for 562.1 billion tenge, issued 2,549 loans for 353.1 billion tenge.
“On behalf of the Head of State, given in his Address to the people of Kazakhstan dated Sep. 1, 2020, an additional 200 billion tenge will be allocated to support enterprises in the sectors most affected by the consequences of the crisis. Thus, the budget of the program will be brought to 800 billion tenge, and its implementation period will be extended until the end of 2021,” Dossaev informed.
Support for housing construction continues with funding from the National Bank.
- Under the 7-20-25 program, as of Sep. 3, 2020, 22,046 applications for 257.7 billion tenge were approved, of which 17,780 loans were issued for the amount of 206.2 billion tenge.
- Under the Baspana Hit market mortgage program, as of September 3, this year, 38,384 applications were approved for the amount of 330.9 billion tenge, 30,934 loans were issued for 259.7 billion tenge.
Against the background of the growth of online trading in January-July of this year, the volume of transactions using payment cards of Kazakhstani issuers increased compared to the same period last year by 58.9% to 24.6 trillion tenge.
At the same time, the number of non-cash transactions increased 2.2 times, and the amount — 2.5 times. The bulk of these operations were carried out online.
In order to expand non-cash payments, the National Bank in August of this year began to transfer large transactions to non-cash payments by introducing a new mechanism for non-cash payments for real estate transactions.
The new mechanism will make the process of concluding a transaction fast and convenient, will increase the level of digitalization of services in the country, significantly increase the security of settlements for large transactions, reducing the risk of fraud and helping to reduce the shadow economy.
“Despite the recovery, the global and national economies continue to function in an environment of increased volatility. The growth of turbulence in the external financial and commodity markets, which began in early September this year, will affect the domestic market. Under these conditions, the National Bank will closely monitor the situation and take all necessary measures to ensure price and financial stability, as well as create favorable conditions for economic recovery,” Dossaev said.