Analysts Predict Weaker Tenge and Lower Oil Prices

Financial market analysts have downgraded their forecasts for the tenge both in the short and long term, Orda.kz reports.

The Association of Financiers of Kazakhstan (AFK) published the results of a survey of professional market participants, asking them to predict key indicators for the next month and year. The outcome was discouraging: brokers, insurers, analysts, and major banks expect the dollar to keep rising and oil prices to fall.

Expectations for the tenge have worsened significantly. Market participants now predict the dollar will cost 541.7 tenge in September (previously 523.4) and 573 tenge in a year.

Earlier, the year-ahead forecast was more optimistic at 548.5 tenge per dollar.

Expectations for the national currency have deteriorated against the backdrop of strong, fundamentally unjustified volatility in the foreign exchange market, the projected decline in the trade balance surplus, rising domestic demand for foreign currency, and unstable commodity prices,
the AFK report states.

Inflation forecasts have also risen — from 10.4% to 11.3% — driven by the weakening tenge. Analysts believe businesses will pass higher transport, logistics, and raw material costs on to consumers, pushing prices up.

While experts do not expect the National Bank to raise the base rate at its next meeting, they believe monetary policy will remain tight in the near term. Oil price expectations have also been lowered: a year from now, Brent is expected to cost $66.5 per barrel (currently $67).

Nevertheless, expected GDP growth in a year is estimated at 4.9% (up from 4.5%) due to projected increases in government investment, active implementation of infrastructure and capital-intensive projects, and expanded natural resource extraction,  the AFK report says.

Earlier, Kazakh analysts had given a more optimistic — though shorter-term — forecast for the tenge, with the AFK stating that the national currency still had potential to strengthen against the dollar.

Original Author: Nikita Drobny