Tag Archives: inflation

Inflation rises in Azerbaijan

JULY 11 2016 (The Conway Bulletin) — Azerbaijan’s Statistics Committee said that the country’s six-month inflation reached 10.5% at the end of June, a consequence of the depreciation of the manat currency. When the Central Bank ditched the peg to the US dollar in December, the manat lost around half of its value. In January and February localised protesters rallied against growing prices in food markets. The Statistics Committee said that food prices were up 12%.

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(News report from Issue No. 289, published on July 15 2016)

Inflation in Georgia falls, again

JULY 4 2016 (The Conway Bulletin) — Georgia’s statistics committee Geostat said annualised inflation dropped to 1.1% in June, its lowest since December 2013, piling pressure on the Central Bank which has tried to boost price rises through interest rate cuts. Importantly, prices for food and non-alcoholic beverages fell by 2.6%.

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(News report from Issue No. 288, published on July 8 2016)

Utility cost rise in Armenia

JUNE 17 2016 (The Conway Bulletin) – Armenia’s state regulator said it will consider a 5% reduction in the price it charges homes for electricity, currently in the 38.8 – 48.8dram range (8-10 cents), adding to the deflationary pressure in the economy. In April, Russia’s Gazprom agreed to apply a 9% discount to the gas it supplied to Armenia. Rising electricity costs for households had sparked a popular protest in the summer of 2015.

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(News report from Issue No. 286, published on June 24 2016)

Georgia’s C.Bank cuts rates

JUNE 15 2016 (The Conway Bulletin) – Georgia’s Central Bank cut its key interest rate by half a percentage point to 7% to combat slowing inflation. In April, the Central Bank cut its key rate for the first time in three years to 7.5% from 8%. The Central Bank has said that it wants to push its interest rate down to around 5% – 6%, described as the country’ neutral rate, after raising it last year to defend its lari currency.

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(News report from Issue No. 285, published on June 17 2016)

Central Banks in Kazakhstan and Georgia fight deflationary pressures

ALMATY, JUNE 10 2016 (The Conway Bulletin) — Currencies across the Central Asia and South Caucasus region have stabilised this year after losing 30% to 50% of their value in 2015 thanks, in part, to record high interest rates but governments are now having to deal with deflation.

As well as raising interest rates to their highest level since the Global Economic Crisis of 2008/9, Central Banks bought heavily to defend their currencies. The Kazakh Central Bank said it bought $3.7b in Jan.-May 2016 and in Georgia, the Central Bank intervened twelve times in just two months, although on a smaller scale.

And both Central Banks have now started unwinding high interest rates, hoping to spark economic activity.

Earlier this year the Kazakh Central Bank cut its key interest rate to 15% from 17%. Georgia’s Central Bank cut its interest rate to 7.5% from 8% and promised further cuts. New data from Georgia’s statistics agency highlighted the challenge. It said that prices in May dropped by 0.4%, the third consecutive month of falling prices. Year-on-year inflation in May measured 2.1%, down from a high of 6.3% in November.

And this scenario is playing out across the region.

Last month Armenia’s Central Bank said that year-on-year inflation measured minus 1.9% and immediately cut interest rates by 0.5% to 7.75%.

But Alex Nice, an analyst at the Economist Intelligence Unit, said that the region’s weak banking systems and high levels of dollarisation means that there is little Central Banks can do to impact economic activity.

“The exchange rate is a more powerful lever for managing prices in the economy [than the official interest rate],” he said.

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(News report from Issue No. 284, published on June 10 2016)

Kazakhstan’s CBank cuts interest rate as inflation begins to slow

MAY 5 2016, ALMATY (The Conway Bulletin) — Kazakhstan’s Central Bank cut its key interest rate by two percentage points to 15% because it said that inflation was slowing and the overall economic outlook was improving.

The consumer price index grew in April to an annualised rate of 16.3%, its highest since 2009, but the Central Bank said that the pace of inflation had slowed.

“Seasonally adjusted, annualised month-on-month inflation for each of the last three months was within the target range for the annual inflation set between 6% and 8%,” the Central Bank said in a statement linked to its rate change.

“A survey of households also showed that expectations of inflation have subsided as well.”

After months of poor economic data and a 50% devaluation of the tenge currency, any prognosis on Kazakhstan’s economy which is even vaguely positive will be seized upon and lauded. This is the first time in months that Kazakhstan’s Central Bank has shown confidence in its ability to control the money market, a sign that the worst period of a regional economic downturn might be over.

Still, the Central Bank did add a large dash of caution to its outlook.

It said that a potential downside risk to the economy was the “increased tenge-denominated high interest rate liabilities” held by commercial banks, which could put pressure on the financial sector. This is, essentially, a reference to bad loans.

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(News report from Issue No. 279, published on May 6 2016)

Kazakhstan’s $1 stores profit in tough economic times

ALMATY, APRIL 26 2016, (The Conway Bulletin) — A chain of shops touting themselves as ‘$1 stores’ has opened up in Kazakhstan, one of the few retailers apparently prospering during an increasingly vicious economic downturn.

The stores, which operate under the Russian franchise Odna Tsena, carry a classic pared-back budget look and only sell products for 300 tenge (90 cents). Under the slogan “Buy without stress!”, they sell everything from washing up liquid and toilet rolls, to processed food and toys.

And they are busy. On a midweek trip to Odna Tsena, which means One Price, in Almaty, a Bulletin correspondent spoke to four shoppers. They were all women and all appreciated the shop’s discount value.

Nataliya said that she visited the shop almost weekly.

“There is a lot of choice, it’s very comfortable. I usually buy plates and dishes and some toys for my child,” she said. “Compared to other shops it is much better.”

This store opened in December 2015, in the middle of an economic storm which has forced a 50% devaluation of the tenge, pushed up inflation to levels not seen since the Global Financial Crisis of 2008/9 and pressured cost-cutting companies to scrap thousands of jobs.

Across the world, discount stores have tended to prosper during the tougher times and Odna Tsena is bullish about its own prospects.

Botagoz Tlemisova, a director at Odna Tsena, said that the chain planned to open 50 more stores across Kazakhstan in the next three years.

“We’ve been operating for just a few months, but already we’ve seen the loyalty of our customers. Our research has shown that more than 50% of shoppers come back to our shops every two to three weeks,” she told media.

In the Almaty shop, Svetlana said she had popped in because she had heard about the knock-down prices.

“I am surprised that everything here has one price, and it is cheap. It is very relevant nowadays when prices are rising on everything,” she said. She also said she would return soon.

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(News report from Issue No. 278, published on April 29 2016)

Georgia cuts interest rate for the first time in 3 years

TBILISI, APRIL 27 2016 (The Conway Bulletin) — Georgia’s Central Bank cut its key interest rate for the first time in three years, performing a policy U-turn designed to boost its flagging economy.

It cut its key refinancing rate by 50 basis points to 7.5%, having steadily raised it from 4% throughout 2015. It said this was the first step towards a rate of around 5 or 6%.

“The Monetary Policy Committee considers it necessary to start phasing out the tight monetary policy, which means the gradual reduction of the refinancing rate down to the neutral level in the medium-term,” the Central Bank said in a statement.

“The rate of further monetary policy softening will depend on the revised inflation forecasts.”

In March, annualised inflation fell to 4.1% from 5.6% in February.

The Central Bank also dropped the lari-denominated minimum capital requirements for its commercial banks from 10% to 7% and increased the US dollar-denominated requirements.

It did this to try to push more lari into circulation and to take the US dollar off the market.

Alongside the less-than-rosy economic news, the Central Bank said that there had been signs of improved economic activity, especially in construction, but that high interest rates and other issues were a brake on potential growth.

“Another factor keeping the economic growth low is the negative impact of the economic situation in Georgia’s trade partners, reflected in the decrease of remittances and weakening of external demand,” it said.

Russia and Greece have traditionally been Georgia’s main source of remittances. Russia is currently in a recession linked to low global oil prices and Western imposed sanctions. Greece’s economy remains in recovery-mode after the impact of the 2008/9 Global Financial Crisis.

Like inflation, GDP growth has also been sluggish. The Statistics Committee said GDP grew by 2.3% in Q1, one percentage point slower than the expectations. The Central Bank expects 3% GDP growth in 2016.

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(News report from Issue No. 278, published on April 29 2016)

Editorial: Georgia’s Central Bank

APRIL 29 2016 (The Conway Bulletin) – Georgia’s Central Bank sounded confident in its review of the country’s monetary policy, but looking at the data, the cheers are a bit more muted.

Yes, high interest rates have curbed inflation and stabilised the lari exchange rate — together with a few interventions in the currency market, that is — but economic activity and GDP growth have suffered.

The Central Bank has now hinted that the country needs to reach a new normal and said it will lower interest rates further in the next months.

Should Georgia be able to weather what analysts deem to be the last months of a two-year crisis, it could see growth pick up again in 2017.

The crucial issue, though, is how to boost the economy without pushing inflation too high.

Georgia is moving towards a more West-friendly economic environment, changing the tax code and giving incentives to foreign companies looking to set up shop in the country.

Both the IMF and the government now hope that their bet on the neo- liberal model will work.

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(Editorial from Issue No. 278, published on April 29 2016)

Water tariff in Kazakhstan increases by 28%

APRIL 18 2016 (The Conway Bulletin) – The cost of running water to Kazakh households was an average 28% higher in March 2016 compared to a year earlier, data from the Statistics Committee showed. The data underlined just how sharp inflation has been in Kazakhstan since a devaluation of the tenge last year. In some areas the price was even steeper. In Aktobe, the price of water has increased by 76%.

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(News report from Issue No. 277, published on April 22 2016)