Moody’s: Kazakhstan Doing Fairly Well With Economy, Finances
Dec 29. Dow Jones Newswires
By Joan E. Solsman
Moody’s Investors Service said Kazakhstan’s moderate economic resilience and financial robustness support its current rating, according in a summary credit opinion about the Central Asian country.
The firm has Kazakhstan’s government ratings at Baa2, two steps above junk territory.
Moody’s said the former Soviet republic’s moderate economic resilience is a combination of its midrange per-capita gross domestic product and a relatively undiversified economy on the one hand, as well as low institutional strength with relatively modest governance and rule of law on the other.
Kazakhstan has one of the largest economies in the region thanks to its vast natural resources, but as such the economy relies heavily on oil and other extractive industries.
The firm said it assesses the country’s financial robustness as moderate because of the government’s relatively strong debt metrics as well as a moderate susceptibility to macroeconomic event risk.
However, Moody’s noted that while the banking system’s debt restructuring has progressed since the global financial crisis, banks remains saddled with large nonperforming assets and are undergoing regulatory reform. The firm is predicting banking won’t contribute to GDP growth as it did before the crisis.
Nevertheless, the firm said the commodity sector’s economic potential and resilience, as well as Kazakhstan’s more favorable demographic developments than those of such neighbors as Russia and Ukraine, underpin medium-term growth prospects.
It said strengthening of public institutions-especially in the banking sector-and success in restructuring banks would exert positive ratings pressure, as would further expansion of the foreign reserve and the National Oil Fund, or economic diversification away from energy.
Factors that could pressure ratings downward included any significant depletion of foreign currency reserves and savings in the oil fund cushion, if they seemed unlikely to replenish in the medium term. It also listed deterioration in the banking system that hinders economic recovery or an increase in political risk, such as questions about presidential succession.