Kazakhstan is the only member of the Russia-led Eurasian Economic Union trading bloc in which purchasing power has suffered a decline this year.

As the Finprom monitoring agency found in an analytical article published on June 16, while salaries in Kazakhstan registered a notable upward surge in the first quarter of 2023, that trend was wholly undermined by galloping inflation.

Wages over January-March grew by around 19 percent as compared to the same period in 2022. Inflation was higher.

Although impressive, that figure compares unfavorably with fellow EAEU members, Kyrgyzstan and Armenia, which saw 42 percent and 23 percent salary increases, respectively. For those countries, that represented 24 percent and 15 percent rises in purchasing power, respectively. Even Russia and Belarus have experienced slight improvements on that front, despite being targeted with a wide range of Western sanctions.

In Kazakhstan, purchasing power shrank by around 1 percent over the recorded period.

There is some slim consolation in the broader scheme of things. Kazakhstan is the second-best performer in salary terms overall as compared to EAEU peers. The average nominal monthly salary in Kazakhstan in the first quarter of 2023 was $750. Only Russia performs better with $918. Despite improvements to their economy, Kyrgyz workers averagely earn $354.

Inflation is Kazakhstan’s blight. Kazakhstan leads the way in price growth in the EAEU across almost all commodity groups. Food prices in Kazakhstan in January-March rose by 24 percent, as compared to 9 percent in Russia, Finprom found. Where prices for clothing rose by an average of 7 percent across the bloc, the figure in Kazakhstan alone was 17 percent. 

In September, the National Bank forecast a range of 16-18 percent inflation in 2022, but that fell quite a bit short of the 20 percent rate ultimately recorded. Things only became worse in February, when the number reached a peak of 21 percent. Inflation dropped to almost 16 percent in May. 

In its analysis, Finprom questions the efficiency of the National Bank response to this ongoing problem. The strategy has hinged in no small part on strictly holding fast to a 16.75 percent base rate, the highest in the EAEU area. While economic convention is that this is a typically assured way to pin back inflation, the effect in this case appears to have been limited. High borrowing costs are, meanwhile, constraining opportunities for private enterprise to flourish.

Given that set of fundamentals, Finprom analysts question whether the National Bank will be able to hit its inflation target of 7.5-9.5 percent for this year.