ACRA FINANCIAL STRESS INDEX FOR KAZAKHSTAN

The Structural Financial Stress Index for Kazakhstan (ACRA SFSI KZ) rose to 3.63 pts in 2018 from 2.6 pts a year earlier. Greater instability of the Kazakh financial market is largely due to currency risks. The growth in ACRA SFSI KZ is mainly driven by the increase in the currency risk trigger (the volatility of the KZT exchange rate rose by 63% in 2H2018), while the refinancing risk trigger edged up by 4% in the same period. In 2019, the most significant risk for ACRA SFSI KZ is expected to be the risk of increased volatility of the currency trigger, driven by the instability of the KZT exchange rate. In the context of the refinancing risk trigger, there are no significant potential risks, since the NBRK's interest rate policy is likely to be mild throughout the year.

In early 2018, the Structural Financial Stress Index for Kazakhstan (ACRA SFSI KZ) continued sliding and reached 0.52 pts by the end of 1Q2018, which is much lower than the previous values of ACRA SFSI KZ. It indicates a growth of stability in the national financial system. The index is very close to its pre-crisis level: in 2010–2013, its value was equal to zero. In this period, the interest rate spread and the foreign exchange rate were the lowest. In 2H2018, the potential risks for the Kazakhstan's financial system may be caused by the growing demand for foreign currency, driven by seasonality and expectedly weaker tenge in case of growing exchange rate for base currencies.