ASTANA, Kazakhstan, May 18. Fitch Ratings has affirmed Kazakhstan's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB' with a stable outlook, Trend reports.
According to Fitch, Kazakhstan's 'BBB' IDRs reflect very strong sovereign external and fiscal balance sheets that have been resilient to shocks, and financing flexibility is underpinned by accumulated oil revenue savings.
Fitch forecasts the current account deficit narrows slightly to 2.5 percent of GDP in 2025 as moderating import growth and higher oil production offset a lower oil price (of $70/b) and cooling re-exports.
At the same time, Fitch anticipates annual oil production of 89.9 million tons (mt) in 2023 will be boosted by 12 mt on completion of the Tengiz oil field expansion, expected in 2H25, and will slightly decline thereafter due to aging fields.
In addition, overall FX reserves (including NFRK's non-equity holdings) are projected to rise to 10.4 months of current external payments at end-2025 from 8.9 at end-2023, well above the projected 'BB' median of 4.9 months.
In Fitch's view, Kazakhstan is likely to remain heavily reliant on crude and oil condensates, which account for 53 percent of exports and around one-third of fiscal revenues.
Almost 80 percent of Kazakhstan's oil is exported through the Caspian Pipeline Consortium (CPC) via Russia. In Fitch's view, this creates geopolitical risk. Although Kazakhstan is diversifying supply routes (via Azerbaijan to Europe), CPC will remain the main route in the medium term due to its cost advantages.
Moreover, Fitch continues to view Kazakhstan as at relatively low risk of broad-based secondary Western sanctions, given its implementation of banking sector sanctions and general cooperation on re-export measures, notwithstanding close ties with Russia.
Fitch projects the general government deficit widens 0.8pp in 2024 to 1.9 percent of GDP and to 2 percent in 2025, with moderating expenditure and increasing oil production and non-oil revenue (including from greater digitalization) partly offsetting the drag from a fall in the oil price next year.
In addition, Fitch forecasts general government debt increases to 23.4 percent of GDP at end-2025 from 22.4 percent at end-2023, well below the 'BBB' median of 56.9 percent. Kazakhstan's interest in revenue, at 7.2 percent, is more in line with the peer group median of 8.4 percent.
Fitch also forecasts average inflation of 8.6 percent in 2024 and 7.5 percent in 2025, above NBK's medium-term target of 5 percent and the current 'BB' median of 5.9 percent. The Rating Agency anticipates the policy interest rate will be cut from 14.75 percent to a level consistent with a real rate of near 4 percent next year.
In Fitch's view, GDP growth slows to 3.8 percent in 2024 from 5.1 percent in 2023, partly reflecting a cooling of investment, construction, and credit growth and a mild drag from the severe flooding in April in the north-west of the country. The Rating Agency projects GDP growth will accelerate to 5 percent in 2025, significantly above trend, helped by higher oil production.