Macroeconomic Forecast Kazakhstan

Inflation continued to surge in February, with the consumer price index increasing by 18.8% y-o-y, marginally up from 18.7% the previous month, representing a substantial acceleration from 7.9% growth in February 2007. The sustained rise in aggregate prices continues to be driven by the elevated price of soft commodities. Though we believe that food price inflation will start to moderate in Q208-Q308, aggregate price growth will remain elevated through 2008, which underpins our end-year inflation forecast of 9.0%. With headline inflation continuing to surge higher, the National Bank of Kazakhstan (NBK) will come under increasing pressure to loosen monetary policy. Following a 200bps hike in December, the reference rate has remained unchanged at 11.0%, though may be due for a cut in the second quarter.

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