NUR-SULTAN

Fitch Ratings has affirmed Kazakhstan’s long-term foreign-currency Issuer Default Rating (IDR) at ‘BBB’ with a Stable outlook.

“Kazakhstan’s ‘BBB’ IDRs reflect strong fiscal and external balance sheets that have been resilient to the coronavirus and oil price shocks, and financing flexibility underpinned by accumulated oil revenue savings,” Fitch said in a report.

“Set against these strengths are its high dependence on commodities, higher inflation, lower but improving governance scores and underdeveloped economic policy framework relative to ‘BBB’ peers.”

According to Fitch, governance, as measured by World Bank indicators, is a weakness for creditworthiness, and rating implications from the fallout from recent unrest will depend on the evolution of political, social and governance developments and the direction of economic policy.

Economic growth is forecast to remain broadly stable and consistent with the ‘BBB’ median at around 4 percent.

“Fitch anticipates a modest slowdown to 3.9 percent in 2022 from 4 percent in 2021, owing to the less expansionary policy mix. The direct impact of the unrest on the economy is small and likely financial compensation means there should not be permanent damage,” the agency said.

Oil production is projected to rise in line with the OPEC+ agreement, higher global demand will support mineral production and a likely normalisation of agricultural output will be supportive. The investment will likely have a stronger contribution to growth in 2023 reflecting large energy projects. Oil production at the Tengiz expansion project is due to start in 2024, with positive implications for growth, fiscal and export receipts.

Fitch said that strong sovereign external buffers remained key support for Kazakhstan’s rating.

Combined external assets at the state oil fund and central bank were an estimated 46 percent of gross domestic product (GDP) at the end of 2021 and sovereign net foreign assets (SNFA) were 36.6 percent, compared with a ‘BBB’ median of 0.1 percent.

“Higher oil revenues will preserve the strength of the balance sheet while allowing for additional support for the economy. SNFAs are forecast at 32.6 percent of GDP at the end of 2021,” Fitch said.