Fitch affirms rating of Kazakhstan at "BBB+", outlook "Stable"
Almaty. November 12. KazTAG - Fitch Ratings has affirmed the rating of Kazakhstan at "BBB+", outlook "stable", reports the international rating agency.
"Fitch Ratings has affirmed Kazakhstan's Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'BBB+' and 'A-' respectively. The issue ratings on Kazakhstan's senior unsecured foreign currency bonds are also affirmed at 'BBB+'. The Outlooks on the Long-term IDRs are Stable. The Country Ceiling is affirmed at 'A-' and the Short-term foreign currency IDR at 'F2'," reads the statement.
According to the statement "A strong sovereign balance sheet, underpinned by past prudent management of the public finances, allows Kazakhstan to absorb the impact of falling oil prices and a slowdown in two of its largest trading partners, Russia and China".
"The National Fund of the Republic of Kazakhstan (NFRK) contained USD76bn at the beginning of October 2014, or 36% of GDP. It added USD5.4bn in January-September and should continue to grow, albeit at a slower pace.
Fitch experts indicated that National Bank policy actions so far in 2014 have highlighted weaknesses in the monetary policy framework and undermined confidence in the local currency. The authorities devalued the tenge by 19% against the US dollar in February but subsequently intervened heavily to support the currency. The tenge is trading within the National Bank's recently expanded exchange rate band, but will likely come under renewed pressure if either the bilateral exchange rate with the Russian rouble or oil prices weaken further.
Fitch expects real GDP growth to slow to around 4% per annum in 2014-2016, from 6% in 2013. Investment is growing but the devaluation shock and a slowdown in credit growth have hurt consumption growth, which has been a major driver of the economy since 2011.
Fairly high per capita income, a strong if uneven track record of growth, and a large natural resource endowment are structural strengths. Structural weaknesses include low governance scores and underdeveloped institutions compared with similarly rated sovereigns, according to the World Bank indicators. Commodity dependence is high. Oil and gas account for 70% of goods exports. Including metals and ores, commodities account for at least 90% of exports. -The banking system is a weakness. The system continues to reduce its external debt. However, efforts to rid bank balance sheets of non-performing loans totaling 30% of system assets have progressed slowly, and contingent liabilities pose a risk to the sovereign. The depreciation of the tenge will take a further toll on asset quality.