Country Report Kazakhstan October 2009

Outlook for 2010-11

• The president, Nursultan Nazarbayev, is likely to stay in office in 2010-11. However, he could face growing popular dissatisfaction as the global recession negatively affects incomes and the unemployment rate rises.
• 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, a widening compared with 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 will have pushed the current account into a deficit of 2.5% of GDP in 2009. This will widen to 3.8% by 2011.

Monthly review

• Kanat Saudabayev's appointment as foreign minister may be an attempt to divert attention from Kazakhstan's record on democratisation ahead of its chairing of the Organisation for Security and Co-operation in Europe (OSCE).
• International human rights groups and governments have expressed concerns over the trial of prominent human rights activist, Yevgeny Zhovtis, on charges of dangerous driving. The trial was widely criticised for procedural violations.
• A temporary ban on petrol and diesel exports was introduced in September and will stay in force until November 1st. The government wants to ensure that the domestic market has sufficient oil products during the harvest.
• In August industrial production rose for the third consecutive month, by 2.3% year on year, largely reflecting an increase in oil and gas output, providing a tentative sign that the economy is recovering.
• The trade surplus fell to US$4bn in the first half of 2009. There is likely to have been an improvement in trade dynamics in the second half, reflecting the recovery in oil prices and a boost to grain exports from a good harvest.

This report covers the following industry codes:
SIC Code: 60;1;47;2834;70
NAICS Code: 52;11;48;3254;72