Kazakhstan’s long-term ratings descends to 'BBB'
By Sara Rajabova
Standard & Poor's has lowered the long-term ratings on Kazakhstan to 'BBB' from 'BBB+'.
A report by the agency gave a negative outlook for Kazakhstan amid the falling oil prices, which have fallen by more than 50 percent since mid-2014. Such a sharp drop in oil prices has greatly affected the growth prospects of Kazakhstan, as the other oil-producing countries.
The fall in the oil prices will have a significant effect on the economic growth prospects, external balance and fiscal performance of Kazakhstan, given the high dependence of its economy on oil revenues, according to agency.
Standard & Poor's expects the real GDP growth of Kazakhstan to slow down to 1.5 percent in 2015, and the growth rate of GDP per capita to average 1.6 percent during the period of 2015-2018. The agency also expects that the fiscal and external balances will weaken as a result of the lower oil price environment and the government's stimulus plans.
The agency’s experts also expect Kazakhstan's oil production to reduce slightly from 81.8 million tons to 80.5 million tons a year in 2015-2016. They also do not expect any significant oil production from the long-troubled Kashagan oil field until 2018.
Kashagan is a large oil and gas field in Kazakhstan, located in the north of the Caspian Sea. The geological reserves of Kashagan are estimated at 4.8 billion metric tons of oil. The total oil reserves amount to 38 billion barrels with some 10 billion of them recoverable reserves. There are large natural gas reserves at the Kashagan field - over one trillion cubic meters.
Standard & Poor's also predict complications for the National Bank of Kazakhstan. “On the one hand, it will be looking to support financial stability in conjunction with the government's efforts to address legacy problem loans in the banking sector. On the other hand, it will want to facilitate an external adjustment through the exchange rate. Similarly, it will not wish to counteract the government's counter-cycle fiscal policy, yet it may need to keep liquidity conditions tight to support the tenge,” the report said.
The agency expects the NBK will either allow a gradual depreciation of the tenge or undertake another step devaluation this year, to accommodate lower oil prices and to ease the tenge's appreciation against the ruble.
However, RIA Novosti quoted Zhaslan Madiyev Deputy Head of Monetary Operations and Asset Management at NBK as saying that NBK did not expect the latest downgrade to have a direct negative impact on the exchange rate of the tenge. He reminded that the central bank had accumulated substantial foreign reserves and had low public debt, adding these were signifiers of Kazakhstan’s creditworthiness.
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Sara Rajabova is AzerNews’ staff journalist, follow her on Twitter: @SaraRajabova
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