S&P confirms stable outlook for Kazakhstan’s sovereign credit rating

NUR-SULTAN – International rating agency Standard & Poor’s confirmed Kazakhstan’s foreign and local currency sovereign credit ratings of “BBB-/A-3” and kept the outlook stable, according to the agency’s statement. March 4.

The government and the National Bank are taking steps to mitigate the consequences arising from Western sanctions against Russia.

A solid budgetary position, significant external reserves, a favorable situation on the oil market are factors supporting the credit rating. At the same time, the availability of liquid external assets significantly supports Kazakhstan’s fiscal sustainability.

S&P expects Kazakhstan’s economy to grow 3.6% in 2022 and around 4% on average by 2025. The agency noted that inflation averaged 8% in 2021 , which is higher than the 4-6% corridor set by the National Bank, reflecting the continued expansionary fiscal policy and rising prices of imported goods. S&P expects inflation to slow to 5% by 2025.

S&P notes that public and external balances will remain stable in the short term and will be sufficient to mitigate possible macroeconomic instability.

According to the agency, the geopolitical situation has not affected the development of Kazakhstan’s credit performance despite close political, financial and economic ties with Russia and the effects of economic sanctions against Russia are surmountable and will not lead to no disruption of Kazakhstan’s access to major oil sources. and gas export markets.

“The fallout from Russia’s military intervention against Ukraine poses manageable risks to Kazakhstan’s macroeconomic stability at this time,” the experts said.

The floating exchange rate regime with multiple currency interventions from the central regulator has helped the economy adjust to external pressures. According to S&P, the tenge is expected to strengthen in the second half of 2022, which fell nearly 15% due to the Russian-Ukrainian conflict.

Analysts note that Kazakhstan’s effective macroeconomic policy will continue through measures of economic diversification, private sector development, increasing people’s incomes, improving the investment climate and improving policy tax.

The withdrawal of the National Bank from lending programs will reduce excess tenge liquidity and improve transmission mechanisms.

The agency said the credit rating can be improved if Kazakhstan strengthens its banking sector through further advances in regulatory oversight or improvements in corporate governance, and strengthens its institutional and political efficiency.

However, there are negative scenarios. “We could lower the ratings if the fallout from the Russian military intervention against Ukraine hits Kazakhstan’s external position, for example, if there is a significant depletion of foreign exchange reserves to stabilize the Kazakh tenge market (KZT ). We could also lower the ratings if the budgetary situation deteriorates, for example due to a significant increase in public spending to support the economy, or a drop in income due to the reduction in foreign trade activity. , the agency said.

In September, the agency also assigned a stable outlook for Kazakhstan, saying sustained fiscal policies and expectations of economic recovery were the main factors determining the credit rating. He highlighted the government’s fiscal support measures in 2020 which have become one of the main factors to ensure the stability of the economy and prevent sharp fluctuations in the level of social assistance recipients in the population. .

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