Country Report Kazakhstan January 2009

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 just above 1% in 2009. A pick-up in oil prices will result in a slight acceleration in growth in 2010, to 2.9%.
• Average annual consumer price inflation is expected to decelerate, from 17.2% in 2008 to 8.3% in 2009 and to 8.2% in 2010, owing to much 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 is estimated to have put the current account into surplus for the year, but much weaker oil prices will push it back into deficit in 2009. The deficit will narrow in 2010, owing to a pick-up in oil prices.

Monthly review

• The government has unveiled a package of political reforms intended to ensure that Kazakhstan meets commitments made to the Organisation for Security and Co-operation in Europe (OSCE) before it chairs the body in 2010.
• The legal amendments have sparked fresh speculation that Kazakhstan could face an early election to prevent it from assuming the OSCE chairmanship with a one-party parliament.
• The authorities have revised downwards their budget revenue and expenditure targets for 2009-11, in light of the sharp drop in global oil prices. They have also reduced the rate of a new resource extraction tax.
• The government's Tenge2.17trn (US$17.4bn) Action Plan to stimulate the economy has five main components, including stabilisation of the financial sector, and support for small and medium-sized enterprises (SMEs).
• Kazakhstan's mining industry is holding up, but negative output trends in the manufacturing sector have pulled down overall industrial growth, which increased by just under 3% year on year in January-October 2008.
• Falling global commodity prices contributed to a drop in producer prices of almost 19% month on month in November. Year-on-year consumer price inflation, at 11.3%, was the lowest for more than a year.

Source: Country Report