Country Report Kazakhstan July 2009

Outlook for 2009-10

• The president, Nursultan Nazarbayev, is likely to stay in office in 2009-10.
• Nevertheless, Mr Nazarbayev could face growing popular dissatisfaction with his rule as incomes fall, along with increased opposition from groups that lose out in the struggle between factions of the political and economic elite.
• Increased government intervention will remain a feature of economic life even after the current crisis has passed. This is likely to depress economic growth in the forecast period and beyond.
• Real GDP growth is forecast to contract by 0.8% as a result of low prices for oil and metals, as well as falling domestic and foreign demand. A moderate pick-up in oil prices will help a return to growth in 2010.
• Annual average consumer price inflation is set to decelerate from 17% in 2008 to around 7% in 2009-10, owing to lower global commodity prices, low credit availability and the drop-off in domestic economic activity.
• A speculative attack on the tenge or a worsening of the situation in the banking sector could force the authorities into another devaluation.
• Imports are forecast to fall in 2009, owing to weak domestic demand, but much-reduced oil-related export revenue will push the current account into? deficit.

Monthly review

• A bout of in-fighting at the top of economic and political structures culminated at the end of May in the arrest of Mukhtar Dzhakishev, the head of the state nuclear agency, along with several of his associates.
• In June Kazakhstan broke off negotiations to enter the World Trade Organisation (WTO) in favour of attempting to join as part of a customs union with Russia and Belarus.
• Astana Finance announced in May that it was to default its foreign debt repayments. The IMF has offered practical suggestions for strengthening the financial sector as the authorities move towards a less risky banking model.
• Real GDP contracted by 2.2% year on year in the first quarter, which was slightly worse than suggested by preliminary estimates.
• Although the pace of manufacturing decline slowed in May, strong evidence for the "green shoots" of growth has so far proved elusive. The fall in retail sales accelerated as unemployment continued to grow.
• The trade surplus in January-April 2009 was almost 80% smaller than in the year-earlier period. The main cause was a halving of exports, linked to low commodity prices and the fall-off in external demand.

This report covers the following industry codes:
SIC Code: 39
NAICS Code: 31