Standard & Poor's Ratings Services said today that it raised its long-term foreign and local currency sovereign credit ratings on the Republic of Kazakhstan by one notch to 'BBB' and 'BBB+' from 'BBB-' and 'BBB', respectively, the agency's report reads.
At the same time, Standard & Poor's affirmed the 'A-3' short-term foreign currency rating and the 'KzAAA' national scale rating on Kazakhstan. It also raised the short-term local currency rating to 'A-2' from 'A-3' and revised the transfer and convertibility assessment to 'BBB+'.
In tandem with the sovereign upgrade, Standard & Poor's also raised its foreign and local currency issuer credit ratings on the Development Bank of Kazakhstan (DBK) to 'BBB' and 'BBB+' from 'BBB-' and 'BBB', respectively. The outlook on Kazakhstan and DBK remains stable.
"The ratings on the Republic of Kazakhstan benefit from our view of the resiliency of the government's balance sheet after several bank failures and a terms of trade shock in 2008 and 2009," Standard & Poor's credit analyst Frank Gill said.
The likelihood that oil output doubles by 2020 and that structural net FDI inflows average 8% of GDP per year underpin our view that GDP growth will average over 7% between 2011-2013, the report reads.
During 2010, Kazakh economy's improving external position increased monetary and fiscal reserves by $4.2 billion and $5.9 billion, respectively, boosting the country's external liquid assets to just under 8% of GDP. Excluding inter-company debt, gross external debt of the country's combined public and private sectors is set to decline below 40% of GDP by 2011, equivalent to 71% of current account receipts, the reports read. Standard & Poor's consider this level more sustainable in light of the country's significant export sector prospects.
Kazakhstan's current account is set to end the year in a surplus of 3.5% of GDP. Standard & Poor's projects the current account position to return to deficit over the medium term as investment-related imports increase in conjunction with the projected doubling of output in the Kashagan field by the end of the next decade.