Country Report Kazakhstan November 2009

Outlook for 2010-11

• The president, Nursultan Nazarbayev, is likely to stay in office in 2010-11. However, he will have to work harder than before to ensure that tensions among the elite and the impact of the recession do not weaken his control.
• The authorities will continue to pursue a "multi-vectoral" foreign policy, in terms of political, economic and security relations. Strong ties in these areas with Russia and China will be prioritised.
• The drop in real GDP is estimated at around 2% in 2009, reflecting low commodity prices and weak demand. Higher oil prices and improving global conditions will lead to moderate growth in 2010-11.
• The budget deficit is estimated at 3.4% of GDP in 2009, which is wider than in 2008, reflecting efforts to counter adverse demand trends. The deficit will start to narrow in 2010, falling to 1.8% of GDP in 2011.
• A speculative attack on the tenge or a worsening of the situation in the banking sector could force another devaluation, although the authorities will do everything in their power to prevent this, including raising interest rates.
• Although imports have fallen because of weak domestic demand, it is estimated that reduced oil revenue pushed the current-account into a deficit equal to 2.2% of GDP in 2009. The deficit will narrow to 1.4% of GDP in 2011.

Monthly review

• The proposal to amend the constitution to allow Mr Nazarbayev to become president for life has gained momentum. The opposition has criticised the proposition, claiming that it runs counter to democratic principles.
• Tax revenue fell by 20% year on year in January-July, reflecting the slowdown in economic activity and lower corporate profits. The budget deficit has been kept in check through transfers from the national oil fund.
• TengizChevroil, Kazakhstan's largest oil producer, expects to produce 22.5m tonnes of oil in 2009. This should help to make the government's oil production target of 75m tonnes easily achievable.
• The 2009 grain harvest reached a record 21m tonnes, a significant improvement compared with the poor harvest of 2008. The improved harvest will provide support for economic growth in the third quarter.
• Bank loans totalled Tenge8.07trn (US$55bn) at the end of August. Loans to firms rose by 17.6% year on year, whereas loans to individuals fell by 3.3%.
• The current-account deficit widened to US$2.6bn in the second quarter of 2009, from US$1bn in the first quarter, according to data from the National Bank of Kazakhstan (NBK, the central bank).

This report covers the following industry codes:
SIC Code: 60;89
NAICS Code: 52;81