Government • 10 July, 2018

First half year development results: slowdown in inflation processes and high investment activity

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At the meeting of the Government chaired by the Prime Minister Bakytzhan Sagintayev, the results of the socio-economic development and execution of the republican budget for the first half of 2018 were considered.

Minister of National Economy Timur Suleimenov reported that GDP growth in the first half of the year was 4.1%. In general, the economic recovery occurs amid the continued slowdown of inflationary processes and high investment activity.

"Inflation is steadily narrowing and reached its lowest point in the last three years. From the beginning of the year it was 2.6%. For all components of inflation there is a slowdown in price growth," Suleimenov said.

Investments in fixed assets retain a trend of intensive growth — 25.8%. Industrial production maintains the growth momentum, an increase of 5.2%. The mining industry increased by 5.5%. The dynamics of the manufacturing industry demonstrates stable growth. According to the results of the first half of the year, the growth rate was 5.2%.

Among the processing industries, double-digit growth is maintained in the production of paper products (12%), the chemical industry (11%) and mechanical engineering (17.2%). In other major processing industries, such as metallurgy (3.4%), refining (4.4%) and food production (5.2%), positive growth has been maintained.

The release of agriculture is gaining momentum with an increase of 4%. Strengthening of growth is associated with faster rates of animal husbandry (4.2%).

The growth trend in the construction industry increased sharply to 3.8% for the six months. The growth was caused by the increase in construction of residential buildings, industrial and social facilities, gas and gas pipelines, a gas compressor station, the reconstruction of highways, the runway in the city of Semey, and the modernization of the Shymkent petrochemical plant.

The minister of national economy said that the increase in consumer demand and sustained business activity in the real sector of the economy — an increase of 3.8% — drove the growth in the sphere of services. In trade and transport, the acceleration of favorable development dynamics was registered at 5.9% and 4.9% respectively. The growth rate of communication reached 5.9%.

Also according to Timur Suleimenov, there is a positive growth rate in the sectors of the economy in the regional context. At the same time, the minister stressed that now the dynamics of the development of the regions will be monitored not in 16 regions, as before, but in 17 regions.

The foreign trade turnover is steadily on a high growth trajectory. For the first quarter it increased by 24.3% or $21 billion. Exports increased by 27%.

"High production activity has had a positive impact on the labor market indicators. Since the beginning of this year, 178,700 people have been employed (June 1). Wages are growing at a moderate pace. In January-May, the average monthly salary was 152.8 thousand tenge and grew in real terms by 0.8%. Real monetary incomes for January-April increased by 1.2%," Suleimenov said.

In conclusion, the minister noted that taking into account the stable and qualitative first half-year, there is a potential for ensuring the 4+ GDP growth. To do this, it is necessary to keep the development of the economy at the level of 3.9% in the third quarter and 4% in the IV quarter.

Chairman of the National Bank Daniyar Akishev said that inflation since the beginning of the year (2.6%) is lower by 3.5% compared to the same period last year. Inflation in annual terms was 5.9% against 7.1% in June 2017. Thus, the inflation rate corresponds to the target corridor of 2018 — 5-7%.

"Slowing down inflationary processes and maintaining this trend in the medium term is one of the main factors in reducing the base rate. Since the beginning of this year, it has been reduced fourfold: from 25% to 9%," said Daniyar Akishev.

Akishev also noted that a favorable factor for the exchange rate of tenge is the preservation of the price of oil above the $70. The gold and currency reserves of the National Bank totaled $30.7 billion at the end of May. The total international reserves amounted to $89.9 billion, having increased by $826 million since the beginning of the year.

Deposit markets as of the end of May amounted to 16.9 trillion tenge. In their structure, deposits in national currency increased by 2.6% in January-May to 9.4 trillion tenge. In foreign currency — decreased by 10.2% to 7.5 trillion tenge. Loans to banks at the end of May amounted to 12.7 trillion tenge. In their structure, loans in the national currency grew in January-May by 2.2% to 9.6 trillion tenge, in foreign currency they decreased by 5.8% to 3.1 trillion tenge.

Akishev also reported on the implementation of the mortgage program 7-20-25, launched in early July. So, the result of the work of the National Bank was the adoption of the necessary legislative amendments and the creation of Baspana special organization.

"The program involves issuing mortgage loans in national currency at a rate of 7% with an initial contribution of 20% of the value of housing for a period of 25 years. At the same time, the program does not require targeted state financing and is carried out by attracting long-term resources in the stock market. Within the framework of the program, the first loans have already been issued," the chairman of the National Bank informed.

Minister of Finance Bakhyt Sultanov in his report noted the growth of revenues at budget levels. Compared to the same period last year, the growth rate of the state budget revenues (excluding transfers) amounted to 112%, or came in at 407 billion tenge more. The revenue growth of the republican budget was 114% (329 billion tenge), local budgets — 107.3% (77 billion tenge).

Expenditures are mastered with a high percentage and are characterized by the following indicators: state budget — 99%, republican — 99%, local — 99.6%. More than half of the expenditures are directed to the social sphere.

The Ministry of Finance continues to work to expand the use of public-private partnerships, helping to reduce the burden on the budget. For example, as of January 1, under PPP projects, 133 obligations were registered for the amount of 90.4 billion tenge. As of July 1, their number increased to 213 (772 billion tenge).

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