Baku, Azerbaijan, March 14
By Aygun Badalova - Trend:
Standard & Poor's (S&P) Ratings Services has affirmed 'BBB-/A-3' ratings on Kazakhstan on strong fiscal and debt position. The outlook remains negative.
S&P projects the general government of Kazakhstan will remain in a net asset position over the next few years, helped by the authorities' capacity and willingness to contain spending.
"The ratings remain constrained by our view of Kazakhstan's limited institutional and governance effectiveness, owing to the highly centralized political environment, the country's moderate level of economic development, high dependence on the hydrocarbon sector, and limited monetary policy flexibility," said the message from S&P.
Kazakhstan's economy depends heavily on the oil sector - it accounts for an estimated 20 percent of GDP, 50 percent of fiscal revenues, and 60 percent of exports, according to the message.
Due to suppressed global oil prices, S&P expects GDP growth of Kazakhstan will stagnate or contract modestly in 2016.
"This will likely stem from weaker exports and our forecast of roughly flat oil production during the same period, as well as reduced domestic consumption due to the recent tenge devaluation, high inflation, and weak consumer lending," said the message.
S&P expects a moderate economic recovery in Kazakhstan in 2017-2019, as consumption and investments gradually pick up.
The current account deficit will average two percent of GDP in the country in 2015-2017, compared with a surplus in 2010-2014, according to the S&P forecasts.
"Despite the current account performance weakening, we expect reserves will stay broadly stable in 2016-2017. This is because they will be supported by financial account inflows," said the message.
S&P anticipates that borrowings from multilateral institutions will offset the expected fall in foreign direct investment inflows to 2 percent of GDP in 2015-2016, compared with 5 percent of GDP in the past five years.