(The following statement was released by the rating agency)
LONDON, May 09 (Fitch) Fitch Ratings has affirmed Kazakhstan's
and local currency IDRs at 'BBB+' and 'A-', respectively. The
Stable. The Country Ceiling has been affirmed at 'A-' and the
currency IDR at 'F2'.
KEY RATING DRIVERS
Kazakhstan has a strong sovereign balance sheet, with low debt
third-highest net sovereign foreign assets in the 'BBB'
category, estimated at
42% of GDP, underpinned by a sizeable commodity endowment.
Real GDP growth of 6% in 2013 was among the fastest of 'BBB'
Fitch expects some deceleration in 2014. Private consumption has
biggest contributor to growth since 2012, while exports have
stagnated. The blow
to real household incomes from tenge devaluation and slower bank
will lead to softer consumption.
The slowdown in the Russian economy will also have an impact on
accounts for 3.8% of FDI (2009-2013 average) and 7% of exports.
ownership of banks and corporates in Kazakhstan is relatively
wide-ranging trade or financial sanctions were imposed on
Russia, this could
have an effect on Kazakhstan, which is a member of the
Union, soon to become the Eurasian Economic Union.
The National Bank's (NBRK) surprise decision to devalue the
tenge by 19% on 11
February has undermined confidence in the monetary policy
framework, leading to
a sharp rise in deposit dollarisation and an uptick in
inflation. However, Fitch
does not expect further exchange rate volatility. The NBRK
should be able to
hold the tenge within the narrow targeted range; it has recently
prevent appreciation. The devaluation should also help rebalance
account and restore exchange rate competitiveness relative to
Russia, cited as a
concern by the authorities.
The current account recorded a small deficit of 0.1% of GDP in
2013, driven by a
deterioration in the trade balance. Imports of non-food consumer
goods rose 16%.
Following the devaluation, Fitch expects the current account
balance to record a
surplus of 3% of GDP in 2014.
The banking sector remains a weakness, although credit is
growing despite the
heavy burden of bad loans on some banks' balance sheets. The
disposing of its stakes in three banks rescued in 2009 and aims
to speed up the
clean-up of bank balance sheets by purchasing more bad loans and
ceiling on NPLs of 15% of total lending (Fitch currently
estimates NPLs at 33%
of total lending). In February, the NBRK placed regulatory
limits on consumer
lending, which grew by 27% in 2013, twice the rate of overall
lending to the
Other structural factors factored into the rating include weak
relatively weak institutions compared to similarly rated
to the World Bank indicators. Prime Minister Serik Akhmetov
resigned in April,
to be replaced by Karim Massimov, who preceded him in the job.
Commodity dependence is high. Oil and gas account for 70% of
Including metals and ores, commodities account for at least 90%
The Stable Outlook reflects Fitch's assessment that upside and
downside risks to
the rating are currently well balanced. The main factors that
collectively might lead to rating action are as follows:
- Substantial strengthening of the sovereign balance sheet over
the medium term.
- Effective restructuring of bank balance sheets.
- Entrenching low and stable inflation under a more flexible
- Improvements in governance and institutional strength.
- A departure from prudent policy that leads to a sustained
decline in sovereign
- A severe, sustained commodity price shock that negatively
affected the balance
of payments and public finances.
- Excessive lending growth and inadequate risk management in the
- A political risk event.
- Fitch assumes average oil prices of USD105/b in 2014 and
USD100/b in 2015
-President Nazarbayev is secure in power and largely
unchallenged, and he may
run for a fifth term in the December 2016 presidential election.
not experienced a change of leadership since independence and
issue of succession is not settled. While Kazakhstan's rating
below-average governance indicators, Fitch assumes that a
transfer of power
would be orderly.
-Fitch assumes broad policy continuity in the long-term
management of oil
-Fitch's forecasts assume that the Kashagan oilfield, having
production and shut down in Q4 2013, will not contribute
significantly to oil
production before 2016.
-Fitch assumes that no wide-ranging trade and financial
sanctions are applied to
Russia, and that it avoids a severe recession or systemic
economic and financial
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Additional information is available on www.fitchratings.com
Applicable criteria, 'Sovereign Rating Criteria' dated 13 August
'Country Ceilings' dated 09 August 2013, are available at
Applicable Criteria and Related Research:
Sovereign Rating Criteria
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