Baku, Azerbaijan, Sept. 12
By Aygun Badalova – Trend:
Standard & Poor's (S&P) Global Ratings affirmed its 'BBB-/A-3' long- and short-term foreign and local currency sovereign credit ratings on Kazakhstan.
The S&P also affirmed the Kazakhstan national scale ratings at 'kzAA', the outlook on the long-term ratings is negative, the credit-rating agency said in a message Sept. 12.
The ratings on Kazakhstan remain primarily supported by the government’s strong balance sheet built on past budgetary surpluses, accumulated during the era of high commodity prices, according to the message.
“The ratings remain constrained by Kazakhstan’s limited institutional effectiveness owing to the highly centralized political environment; the country’s moderate level of economic development characterized by high commodity dependence; and limited monetary policy flexibility,” the message said.
Kazakhstan's economy depends heavily on the oil sector: official estimates suggest it directly comprised about 15 percent of GDP and accounted for over half of exports by value in 2014, according to the S&P.
As oil prices remain low, Kazakhstan will this year register its weakest economic performance since 1998, with output stagnating in real terms, said the message.
The rating agency believes that export volumes will decline not only due to price effects but also due to the aging of the main oil fields, resulting in flat or slightly reducing oil output.
The agency projects that the economy of Kazakhstan will return to moderate growth rates from 2017 with output expansion averaging two percent over 2017-2019. The projected macroeconomic dynamic will be supported by stronger investments and recovering private consumption, according to the message.
Importantly, it will also be supported by stronger export performance as the oil price outlook improves, while the giant Kashagan oil field will finally be launched after a long string of delays, the S&P said.
The latter should lead to a substantial growth in oil production volumes, according to the agency’s message.