BAKU, Azerbaijan, March 7
Trend:
International rating agency S&P confirmed the sovereign credit rating of the Republic of Kazakhstan at BBB on March 4, 2022, Trend reports citing the National Bank of Kazakhstan.
Strong fiscal stance, major external reserves, the favorable situation on the oil market are factors that support the credit rating.
The geopolitical situation did not affect the change in Kazakhstan's credit performance despite close political, financial and economic ties with Russia. Spillover effects of economic sanctions on Russia will be manageable and will not affect Kazakhstan's access to its key export markets, S&P noted.
The country's strong fiscal stance with a low level of public debt and significant liquid assets remains a key factor in maintaining the credit rating as in the past. The introduction of a fiscal rule that limits the amount of transfers from the National Fund to the budget and an increase in oil production will allow Kazakhstan to maintain a strong fiscal position, S&P analysts said.
Kazakhstan's external reserves also remain significant and gross external financing requirements are relatively low.
S&P projects gross domestic product (GDP) growth at 3.6 percent in 2022. Inflation averaged eight percent in 2021, above the four-six percent corridor set by the National Bank, reflecting the ongoing expansionary fiscal policy and higher prices for imported goods, S&P analysts noted.
S&P expects inflation to slow to 5 percent by 2025. National Bank raised the base rate to 13.5 percent in order to maintain price stability under ambiguity, the agency said.
Analysts positively assessed the increase in efficiency, independence and transparency of the National Bank.
Implementation of the plans of the National Bank to withdraw from economic support programs in 2023, joint work with the Ministry of Finance to build a yield curve in order to increase liquidity in the domestic secondary market, strengthen the transmission channel of monetary policy, S&P analysts noted.
Separation of the functions of financial regulation from the competence of the National Bank made it possible to improve the activities of the National Bank to ensure macroeconomic stability, analysts added.
The floating exchange rate regime has helped the economy adapt to external pressures, S&P analysts said.
Tenge is expected to strengthen in the second half of 2022, which has fallen by almost 15 percent due to current events, according to S&P.
The dynamics of the credit rating will depend on the further strengthening of government administration, the policy of state institutions, the effectiveness of monetary policy and the situation of the banking sector, S&P added.