FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT APRIL 2009
KAZAKHSTAN STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic and Political Environment
The president, Nursultan Nazarbayev, is
expected to remain in power over the forecast
period. He will need to demonstrate
considerable adeptness to ensure that a
combination of tension among the elite and
slowing economic growth does not weaken
his control of the political scene. Moreover,
double-digit consumer price inflation threatens
to damage Mr Nazarbayev’s economic record.
Reshuffles of officials within the presidential
administration in 2008 demonstrate Mr
Nazarbayev’s desire to ensure that he is
surrounded by loyal and trusted supporters.
The president’s longer-term goal is to shore
up his position, with a view to guaranteeing a
successful bid for re-election in 2012. Mr
Nazarbayev’s aim over the forecast period will
be to entrench his position and to lessen the
risk of challenges from disgruntled members
of the elite.
In 2009 Kazakhstan will participate in the
"Troika" of past, current and future chairs of
the OSCE, in preparation for its chairmanship
in 2010–the first former Soviet state to hold
this position. How Kazakhstan will use its
chairmanship of the OSCE is unclear, but it is
likely to come under pressure from some
countries–in particular, Russia–to seek to
reduce the body’s role in areas such as
election-monitoring.
Double-digit inflation, liquidity problems in the
banking sector and weak GDP growth will
remain the principal challenges facing
policymakers. With lending from the banking
system virtually stalled in 2008, the authorities
have confirmed their intention to establish a
US$ 6 billion fund, partly financed by the
state, to buy out so-called distressed assets
from the banks. Other measures enacted in
recent months include a reduction in the
refinancing rate and in reserve requirements,
in order to ease the banking sector’s liquidity
problems. The government and the National
Bank of Kazakhstan (NBK, the central bank)
are expected to enact further such measures
should they prove necessary in the coming
months. The authorities will also keep the
exchange rate stable in order to maintain
confidence among depositors, reduce inflation
and bring down exchange-rate risk for sectors
holding foreign-currency debt.
Economic Performance
The downside risks to the world economic
outlook remain elevated, owing to continued
problems in the US and European financial
sectors, and global inflationary pressures.
Global oil prices have fluctuated widely in
recent months, although they have fallen back
from the record-high level recorded in July. A
host of geopolitical factors present mainly
upside risks to the oil price forecast. Slowing
world GDP growth will dampen demand for
industrial raw materials from 2009, leading to
a downturn in prices, including for metals–one
of Kazakhstan’s main sources of export
revenue. As the global economy recovers
from 2010, these prices should again pick up.
Real GDP grew by 5.4% year on year in the
first half of 2008, and full-year growth at
around 5.3% is estimated, with tight liquidity in
the financial sector and sluggish industrial
output combining with double-digit inflation to
depress growth. Real GDP growth should pick
up to around 5.7% in 2009, supported by
investment in oil sector projects and by slower
inflation. Faster growth in bank lending should
enable more rapid economic growth in 2010,
with real GDP to expand by just under 7%.
Rising global food and energy prices are
keeping inflation high, at a year-on-year rate of
around 20% so far in 2008. Weaker economic
and money supply growth are expected to
contribute to a slight deceleration in inflation in
the final quarter of the year. However, the
annual average rate will remain close to 19%,
owing to demand-side pressures, such as
public-sector wage increases and a rise in
social expenditure, as well as the ongoing
impact of high food prices.
Having drawn down its reserves to stabilize
the tenge in the second half of 2007, the NBK
is maintaining a de facto exchange-rate peg
against the US dollar in order to dampen
inflation and reduce exchange-rate risk for
companies that have borrowed in foreign
currencies but have earnings in tenge. Once
inflationary pressures ease, the NBK might
allow the currency to weaken in order to
protect exporting sectors.
The current account posted a surplus of US$
3.9 billion in the first quarter of 2008, one of
Kazakhstan’s largest quarterly surpluses, as a
slowdown in import growth coincided with a
huge rise in oil-related export revenue. TA
renewed pick-up in oil prices in 2010 should
result in a further narrowing of the deficit in
that year. Kazakhstan should cover the
current-account deficit comfortably, owing to
continuing large inflows of foreign direct
investment (FDI). Although the start of
production at the Kashagan offshore oilfield
has been delayed until 2013, annual FDI
inflows into this and other large hydrocarbons
projects will still average around US$ 7.25
billion in 2009-10.*
* The Economic Intelligence Unit Ltd. October 2008
Key Information Contacts
Financial Institutions’ Association of Kazakhstan www.afk.kz/eng/
National Bank of Kazakhstan www.nationalbank.kz
Ministry of Finance of the Republic of Kazakhstan www.minfin.kz
Central Securities Depository www.csd.kz
Kazakhstan Agency for Financial Market and Financial Organizations Regulation and Supervision www.afn.kz
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