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Moody’s: Kazakhstan’s Credit Profile Reflects Growing Economic Resilience

Friday 12 June 2020

SINGAPORE (Moody’s press service) – Moody’s expects Kazakhstan’s growth to remain strong over the medium term, despite contraction in 2020 due to the coronavirus outbreak and lower oil prices. Strong government balance sheet, low debt burden and sizeable fiscal reserves provide ample buffers against external shocks.

Moody’s Investors Service says in a new report that the credit profile of Kazakhstan (Baa3 positive) reflects its increasing economic resilience, supported by medium-term growth prospects in the hydrocarbon and non-hydrocarbon sectors, as well as rising incomes.

Christian Fang, a Moody’s Assistant Vice President and Analyst says:

Kazakhstan’s relatively high growth potential compared with similarly rated peers, moderately high-income levels and ongoing improvements in macroeconomic policy effectiveness also support the country’s economic resilience.

Growth prospects should remain strong over the medium term, despite Moody’s expectations of a contraction in GDP by about 0.5% in 2020 because of the coronavirus and oil price shock. GDP should rebound and grow by around 3.0% in 2021, assuming that economic activity normalises over the next few quarters.

Prospects for further economic reforms, combined with prudent and effective management of fiscal buffers, indicate that Kazakhstan’s credit metrics may strengthen further to be consistent with a higher rating, notwithstanding the near-term but temporary deterioration due to the coronavirus shock.

Further reforms that strengthen Kazakhstan’s institutional framework, policy credibility and effectiveness, and economic competitiveness beyond Moody’s current expectations may also lead to a rating upgrade. Additionally, a substantial reduction in banking sector risks, supported by enhancements to the sector’s regulation and supervision, may create further upward rating pressure.

The positive outlook signals that a downgrade is unlikely over the near term. Moody’s could change the outlook to stable if prospects of a significant and long-lasting deterioration in Kazakhstan’s economic and fiscal metrics became increasingly probable, possibly stemming from a large, negative oil price shock that the government was unable to cushion. The re-emergence of domestic political risks, with an adverse impact on reform agenda and the business environment, may also create conditions for a downgrade.


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