Country Report Kazakhstan December 2008

Outlook for 2009-10

• The president, Nursultan Nazarbayev, will stay in power in 2009-10, having consolidated his hold on Kazakhstan's political structures, but he could face growing dissatisfaction among businesses, owing to the slow pace of reform.
• Liquidity problems in the banking sector and weak economic growth will be among the government's main policy challenges in 2009-10.
• With oil prices set to weaken sharply, the Economist Intelligence Unit expects Kazakhstan's real GDP growth to slow to 3% in 2009, before an easing of liquidity constraints in 2010 allows a modest recovery, to growth of 4.2%.
• Average annual consumer price inflation is expected to decelerate, from 17.2% in 2008 to 8.6% in 2009 and to 8.2% in 2010, owing to weaker global commodity prices and slower credit growth than in recent years.
• The tenge will depreciate slightly against the US dollar in nominal terms in 2009-10, but, with economic growth slowing, the risk of more sustained downward pressure on the currency has increased.
• High export revenue in 2008 will enable the current account to post a full-year surplus, but much weaker oil prices will push it back into deficit in 2009. The deficit will ease in 2010, owing to a slight pick-up in oil prices.

Monthly review

• MrNazarbayev has called for radical reform of the law enforcement system in a bid to fight corrupt practices, but there remains suspicion that a drive to stamp out corruption will be used to settle political scores.
• The government is drawing up a stabilisation programme for the economy. It has embarked on a recapitalisation of Kazakhstan's largest banks and set up a fund to remove non-performing loans (NPLs) from banks' balance sheets.
• Year-on-year real GDP growth was just 3.9% in January-September 2008, implying that growth slowed to 1% in the third quarterthe weakest quarterly rate for almost a decade.
• Investment into Kazakhstan's economy rose by 8.2% year on year in January-September 2008. This respectable growth rate masked a sharp decline in investment into some leading sectorsnotably, oil and gas.
• The UK's BG group has said that it will postpone a decision on whether to go ahead with the next phase of development of the Karachaganak field, owing to the decline in crude oil prices and high industry costs.
• Kazakhstan has signed a deal with Agip KCO, the consortium developing the giant Kashagan oilfield, which envisages a growing role for the national champion, KazMunayGaz, in the management of operations at the field.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52