Key risks to Kazakh economic recovery

Feb 8. Reuters. ALMATY

Kazakhstan, the largest economy in Central Asia, is set for recovery after a bumpy 2009 in a process dependent on a number of external and domestic factors.

Below are key factors that could either drive or hinder economic growth in the former Soviet republic.


Kazakhstan’s primary exports are crude oil and metals including steel, copper, zinc, ferroalloys and gold.

Economic recessions in 2009 and 1998 both followed rapid decreases in global oil prices.

Kazakhstan has set up its rainy day oil fund – known as the National Fund – which is replenished by oil revenues to shield its budget from commodity price fluctuations.

Even so, global prices for key commodities still affect the balance of payments and overall economic growth.


Four Kazakh banks went into default last year citing asset quality problems and, in some cases, management fraud. All are now in different stages of debt restructuring talks.

The largest of those, BTA, said in December it would seek to finalize a detailed agreement with creditors by Jan. 31 but has yet to announce a deal, a worry for investors closely watching the case.

Analysts say other banks are also under stress from mounting bad loans, although those are likely to stabilize and peak this year.


Kazakhstan has attracted over $90 billion in foreign direct investment since gaining independence from Soviet rule in 1991, mostly in the dominant oil and gas sector.

But the government has sought to raise its role in the industry in the last few years, engaging in disputes with investors and tightening regulations in what analysts saw as part of a global trend of resource nationalism.

In the latest step criticised by investors, the government said last month it would strip foreign firms of tax exemptions given to them by production sharing agreements signed in the 1990s.


Ex-Soviet nations Russia, Kazakhstan and Belarus are setting up a customs union this year to boost trade and investment across their mutual borders.

However, some Kazakh business figures fear that local industries such as manufacturing would stagnate as companies find themselves unable to compete with larger Russian producers.

Other critics of the union say it delays the more important process of joining the World Trade Organisation which would be more beneficial for the economy.