ranking 50, World Bank 2015)
||17.5 million (World ranking
63, World Bank 2015)
|Form of state
||Republic / authoritarian
||Nursultan A. NAZARBAYEV
- Authoritarian political regime
- Interventionist and protectionist econo¬mic
- Regional instability in Central Asia
- High vulnerability to world commodity prices
- Vulnerability to Russian business cycle
- Weak monetary policy track record
- Exchange rate vulnerability to external shocks
- Banking sector crisis from 2009 not yet resolved
- High external debt burden
Growth to remain modest
Kazakhstan has an abundance of raw materials, in particular hydrocarbons.
Commodities accounted for 88% of exports in 2014. But this lack of economic
diversification makes the economy highly vulnerable to the global demand
for and the prices of commodities. It is exposed to the business cycle of
Russia, its main trading partner. Moreover, the shutdown of the offshore
Kashagan oilfield in October 2013 (unlikely to resume before 2017) due to
damage to the pipeline infrastructure has hit the country.
As a result, economic growth decelerated from an average annual +8% in
2000-2013 to +4.3% in 2014 and +1.2% in 2015. In 2016, real GDP contracted
by -0.2% y/y in Q1 and grew by +0.4% y/y in Q2. Euler Hermes expects the
recovery to continue, but only gradually, resulting in full-year growth of
+0.4% in 2016 and +2% 2017.
Economic fundamentals to remain weak
In line with the growth slowdown in recent years, economic fundamentals
have weakened and risks have increased. As the KZT which was quasi-pegged
to the USD appreciated sharply against the RUB and the Kazakh economy lost
competitiveness, the Central Bank eventually devalued the KZT markedly
against the USD – first by -17% in February 2014 and then by -30% in August
2015 when it also moved from the peg to a managed floating regime. The KZT
has remained volatile thereafter and is currently down about -80% from
end-2013. However, against the RUB, it is back to the level from early
2013. There is a significant risk that the KZT may depreciate further
against the USD in the next 6-12 months.
The sharp drop of the KZT has caused inflation to surge from 4.8% y/y at
end-2013 to 17.6% in August 2016. Headline inflation should fall soon due
to base effects but remain elevated at an average 8% in 2017.
The fiscal balance shifted to a large deficit of -5.3% of GDP in 2015 and
is forecast to post further shortfalls of -4% or more of GDP in 2016-2017.
Likewise, the current account balance shifted to a deficit of -2.6% of GDP
in 2015 which is forecast to widen to -4.1% in 2016 and to remain high in
The Central Bank’s FX reserves have stagnated at around USD20bn since 2014,
sufficient to cover just about 50% of the estimated external debt pay-ments
falling due in the next 12 months, well below an adequate ratio of at least
100%. However, assets in the NFRK (USD65bn in July 2016) still provide some
cushion with regard to the modest official FX reserves.
Last review: 9/27/2016