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2. work
3. unemployment

COUNTRY OVERVIEW: KAZAKHSTAN
Economic & Political Intelligence Centre
OCTOBER 2014
Short-Term Risk: The banking sector has yet to fully recover from its 2009 crisis and non-performing
loans (NPLs) remain very high (over 30 per cent). Despite robust economic growth, high oil prices and
sizable FX reserves, the government decided to devalue the Tenge by 20 per cent in February.
Commercial Risk: The recent decision to nationalize 11 private pension funds will hamper capital market
development and is evidence of the state taking an ever more pervasive stake in the economy.
Sovereign Risk: The sovereign risk profile reflects the government’s strong fiscal position and the
country’s robust economic growth outlook thanks to a near doubling of energy production over the next
five years. However, the government’s finances are vulnerable to shifts in commodities prices and therefore
economic diversification remains a key policy priority. The country’s ability to export energy to both Asia
and Europe has made it an important regional player.
COUNTRY STATS
President Nursultan Nazarbayev
Country Overview: Kazakhstan is endowed with abundant natural resources and the extractive industry forms the
backbone of the economy (particularly oil and gas which accounts for 60 per cent of export revenue and 50 per
cent of fiscal revenue) and as a key energy supplier to Europe and Asia, Kazakhstan has established itself as an
influential regional player. Record-high oil prices over the past several years have fuelled billions of dollars in
foreign investment into the country. However the current account balance narrowed in 2013 due to slowing gains
in oil production and sharp increases in imported goods. This weakening trade position, as well as the depreciation
in the Russian Ruble (which is one of the currencies against which the Tenge is pegged) was a key reason for the
devaluation in February.
Next Elections
Presidential: 2016
ominal GDP (2013)
N
USD 220 billion
Total Trade/GDP (2011)
79%
Trade and Investment Environment: President Nazarbayev has made improving the investment climate a priority,
vaulting Kazakhstan to 50th in the rankings of the World Bank Ease of Doing Business, the best in the region.
However, the operating environment remains characterized by high levels of corruption, volatile contractual
conditions, heavy bureaucracy, and a weak banking sector. The country recognizes the need to diversify the
economy away from hydrocarbons, and is therefore actively seeking foreign expertise In an effort to join the WTO,
the government has brought its trade and legal regimes in line with the organization’s standards. Kazakhstan is
already benefiting from a new customs union with Russia and Belarus.
Exchange Regime
Managed float
Canadian
Merchandise
Imports to
Kazakhstan (2013)
Total: CAD 172 million
Top Sectors:
Aerospace products, agricultural machinery & equipment, construction machinery & equipment, meat products
Risks to
the Outlook
Macro-prudential reforms facilitate banking sector recovery
Marked drop in commodity prices, escalating Geopolitical crisis in the region
Outlook: The Tenge devaluation will have a mixed impact on the domestic economy this year, leaving the growth
forecast largely unchanged (at above five per cent). Households will be adversely impacted by the weaker currency,
as domestic savings are worth less and purchasing power has been eroded. Businesses with external liabilities will
also be adversely affected by the devaluation and the banking sector will likely see an uptick in the already high rate
of non-performing loans. However, the competitiveness of the exporting sector will receive a boost and government
finances will also benefit. The crisis in Ukraine could have an impact on trade flows within the region, and on
economic conditions in Russia – a key trading partner for Kazakhstan. Further devaluation is possible in 2014 and
will depend on the unfolding crisis in Ukraine and the related impact on the Russian Ruble, which has 3.5839
come under
in
pressure in international markets as sanctions by the West are implemented.
1.717 in
GDP Growth
Economic Indicators
Fiscal Balances
Current Account (% GDP)
Ease of Doing Business:
Regional Comparison (best=1)
200
10.0
150
5.0
200
10
150
5
Ukraine
0.0
100
Russia
0
100
Turkey
-5.0
-10.0
50
2011
2012
2013
2014f
2015f
0
-5
Poland
Kazakhstan
-10
Sources: EDC Economics, Haver Analytics, World Bank, Strategis
EDC does not represent or warrant the accuracy or completeness of the contents.
This information is presented for informational purposes only and is not to be relied upon by the reader.
50
0
Contact the
Economic and
Political Intelligence
Centre for more
information.
epic@edc.ca