Why
does inflation remain high in Kazakhstan?
In Kazakhstan, the most predictable thing about
money is that it’s unpredictable.
In the past few years, the National Bank of
Kazakhstan has hit the brakes on the printing presses, slowing growth in the
supply of tenge (see the table). Normally,
this would slow inflation, which is the average rate of increase in
prices. With fewer tenge to chase every
kefir bottle, kefir prices should fall.
Year
|
Growth
rate of M2 money
|
2011
|
22%
|
2012
|
12%
|
2013
|
5%
|
2014
|
3%
|
2015*
|
1.5%
|
In reality, the rate of inflation has remained stuck
between 6% and 8% for several years, despite the slowdown in money (the figure shows annual inflation rates for consumers). To the National Bank’s credit, inflation has
been far less volatile in Kazakhstan than in conflict-ridden Kyrgyzstan and Tajikistan, and it is lower than in Russia, but it still rises far more rapidly than in the United States. What gives?
Perhaps people pay more attention to the Bank
governor’s statements than to patterns in money supply. Kairat Kelimbetov, who came to power in late
2013, has made clear that he intends to maintain inflation between 6% and
8%. So, people may base their decisions
on that vow rather than on the sharp decline in money growth – a decline that
would justify far lower rates of inflation.
Their decisions determine the rate of inflation; if all workers demand a
7% cost-of-living increase, their employers will raise output prices proportionally
in order to cover the cost.
Maybe Kelimbetov has credibility with the public,
despite his turnabout in depreciating the tenge by about a fifth in February
2014. Or maybe the public will believe anything. – Leon
Taylor tayloralmaty@gmail.com
Notes
Inflation data are from the World Bank, at the Web
site www.worldbank.org . M2 data are
from the National Bank of Kazakhstan, at www.nationalbank.kz. M2 encompasses currency, checkable accounts,
and small savings accounts.
No comments:
Post a Comment