Liabilities that may arise from the restructuring of the banking sector are the challenge for Kazakhstan, Moody’s experts say

Almaty. May 12. Silkroadnews – Kazakhstan’s rating with a negative outlook is supported by its relatively large economy, low public debt burden and substantial fiscal reserves, Moody’s Investors Service said in a recently published report, KazTAG reports.

According to the report, the main challenges include liabilities that may arise from the restructuring of the banking sector, low, albeit improving, institutional strengthen and country’s relatively high share of foreign currency debt.

“Kazakhstan's credit profile balances the strengths of its large economy, low public debt and high debt affordability, against challenges including sizeable contingent liabilities related to the banking sector, relatively high proportion of foreign currency debt and event risks related to the presidential succession”, said William Foster, a Moody's Vice President and Senior Credit Officer and co-author of the report.

As noted, the government debt burden remains low, amounting to about 21% of GDP in 2016. Moody’s expects it to stabilize at around 22% of GDP in the next 2 years, assuming the currency and oil prices are broadly stable.

Moody’s expects that Kazakhstan’s GDP growth will reach 2.5% in 2017 and 3% in 2018, as the oil prices stabilize at around $50 per barrel.

The recovery in the Russian economy will also contribute to the growth along with the Kashagan oil field opening, analysts say.

In their opinion, the banking sector’s risks also prevail, as the quality of assets and capital adequacy have deteriorated due to depreciation of the tenge. However, the relatively small size of the sector mitigates the potential financial costs.