Country Report Kazakhstan May 2009

Outlook for 2009-10

• The president, Nursultan Nazarbayev, is expected to stay in power in 2009-10, but he could face growing dissatisfaction with his rule as economic growth slows and household incomes fall.
• The role of the state in the economy is set to increase under the government's Action Plan for 2009-10 as the authorities attempt to combat liquidity problems in the banking sector and cope with slowing GDP growth.
• With oil prices set to weaken sharply, the Economist Intelligence Unit expects the economy to contract by 0.4% in real terms in 2009. A pick-up in oil prices will result in a return to positive growth, of 1%, in 2010.
• Average annual consumer price inflation is expected to decelerate from 17% in 2008 to around 7.5% in 2009-10, owing to much weaker global commodity prices and slower credit growth than in recent years.
• With economic growth slowing and export competitiveness coming under threat, there is a risk of speculative attacks against the tenge, forcing the authorities to oversee another devaluation of the currency.
• Import costs are forecast to fall in 2009, owing to weak domestic demand, but low oil-related export revenue will push the current account into deficit. The deficit will narrow as a share of GDP in 2010, owing to a pick-up in oil prices.

Monthly review

• Mr Nazarbayev has reshuffled the upper echelons of Kazakhstan's law enforcement agencies, replacing the interior and justice ministers, the prosecutor-general and the chairman of the Supreme Court.
• Criminal cases have been opened against former officials at BTA Bank. The accused, which include Mukhtar Ablyazov, a former chairman of the board, have denied the charges and described them as politically motivated.
• Mr Nazarbayev used the visit to Kazakhstan by the Iranian president, Mahmoud Ahmadinejad, to make public Kazakhstan's offer to host a future global nuclear fuel bank.
• The authorities have revised their three-year budgetary framework and have warned that some Kazakh banks might seek to restructure their external debt.
• The government has announced large public-sector lay-offs and has imposed a hiring freezeas many as 9,000 vacancies in state-owned companies will not be filled.
• Kazakhstan registered a current-account surplus of almost US$7bn (5.4% of GDP) in 2008, compared with a deficit of US$8.2bn (7.8% of GDP) in 2007.

This report covers the following industry codes:
SIC Code: 48
NAICS Code: 517