Country Risk Rating

Political and economic uncertainties and an occasionally difficult business environment can affect corporate payment behavior. Corporate default probability is appreciable. - Source: Coface

Business Climate Rating

The business environment is acceptable. Corporate financial information is sometimes neither readily available nor sufficiently reliable. Debt collection is not always efficient and the institutional framework has shortcomings. Intercompany transactions may thus run into appreciable difficulties in the acceptable but occasionally unstable environments rated A4.


  • Oil and mining potential
  • High levels of foreign direct investment
  • State enjoys a net creditor position, important sovereign fund
  • Floating exchange rate
  • Strategically located between China and Europe
  • Member of the Eurasian Economic Union
  • Increase in the labor force (67% of the population) thanks to fast population growth


  • Economy dependent on commodities (oil, gas, uranium and iron), Russia and China
  • Fragile banking system
  • Institutional shortcomings: corruption, administrative delays, deficiencies in collective proceedings and trade barriers
  • Inadequate road, port and electricity infrastructure
  • Underdeveloped manufacturing base (11% of GDP)
  • Landlocked and low population density, especially in northern regions

Current Trends

Growth driven by domestic demand

Activity will continue to be driven by domestic demand in 2020 but is expected to slow again somewhat owing to the influence of external demand, which will be hurt by the weak economies of Kazakhstan’s trading partners. Exports (70% hydrocarbons and 21% metals, including steel, iron, copper and uranium) are likely to fall in value due to a general downtrend in prices, compounding continued application of the production restriction contained in the OPEC+ agreement. As at the same time imports will be fed by domestic demand, trade’s contribution to growth is expected to remain slightly negative. Conversely, household consumption (55% of GDP) is poised to continue to grow briskly thanks to further fiscal easing. Wages, particularly in the public sector, are expected to rise again, following the minimum wage hike. Low-income and disabled households will get debt relief of up to USD 7,772 in principal and USD 772 in interest. This measure is expected to benefit 500,000 people. Credit should continue to grow strongly, particularly in real estate (+31% year-on-year in June 2019). In addition, income tax is to be cut further. Services (58% of GDP), especially trade, will be boosted by vibrant domestic demand. Investment (22% of GDP) will continue to benefit from the development of infrastructure, including roads, railways, gas and connective infrastructure under the Nurly Zhol program and also potentially under the Chinese Belt and Road initiative, which will support the construction sector (10% of GDP). Development of the Tengiz oil field continues with a view to providing a future growth driver for oil production, which is evening out as the Kashagan field reaches maturity. Meanwhile, the construction of social housing will continue under the Nurly Zher program. Since the US dollar peg was scrapped and the tenge was allowed to float (2015), the central bank has focused on controlling inflation. However, inflation will remain high due to inflationary pressures generated by the increase in wages, which has not been offset by stable prices for imported products, of which 40% come from Russia. In addition, the effectiveness of monetary policy is undermined by the situation of credit, which occupies a small place (18% of GDP) and is frequently subsidized, as well as by dollarisation (43% of deposits and 18% of credit). In addition, the banking system remains fragile. The official percentage of impaired loans, i.e. 9.4% in June 2019, should be updated following the recent asset review. The system is both scattered (about 30 institutions, many small) and concentrated, with one institution accounting for more than a third of deposits. Many institutions are owned by influential people who are not easily pushed into line and who are able to obtain public funds to avoid liquidation. Finally, the system suffers from having a small market that is dominated by household credit, with other sectors either self-financing or turning to foreign markets.

Oil-supported public and external accounts

Despite social measures, the launch of new infrastructure projects and a tax exemption for micro and small businesses, the budget surplus is not expected to disappear. In addition to improvements in collection, revenues (22% of GDP) are fuelled by oil revenues (one-third), and the sovereign wealth fund is also set to be tapped once again to the tune of 4% of GDP, which would compromise the commitment to cut the non-hydrocarbon deficit (7.4%) to 5.4% by 2022. Public debt, whose external share (45%) is mainly held by public creditors, is low, due to the use of the sovereign wealth fund (NFRK), while the central bank is called upon to subsidize credit and cancel debts. A new bank rescue, which is still possible, would not pose any difficulties.

The current account deficit is expected to remain small in 2020. Even with the decrease in oil revenues, the trade surplus (12% of GDP) will offset the income deficit (10%) generated by the large stock of foreign investment in hydrocarbons and the services deficit (2%). Remittances from foreign workers represent less than 1% of GDP.

External debt (93% of GDP at the end of 2019) is expected to decline further. Intra-group loans linked to FDI account for 64% of the total, and the State's share is only 8%. Meanwhile, in July 2019 the central bank's foreign exchange reserves were equivalent to 7.1 months of imports and 18% of GDP, or 4.4 months and 11% excluding gold, while the foreign assets of the sovereign fund were worth USD 60 billion, i.e. 15 months of imports and 33% of GDP.

Fragile presidential succession

Nursultan Nazarbayev stood down in March 2019 after ruling the country since 1989. However, in addition to the powers of arbitrator conferred by his titles of “First President” and “Father of the Nation”, he continues to preside over the powerful Security Council and his party (Nur Otan), which comfortably won the March 2016 legislative elections with more than 80% of the vote. Senate President Kassym-Jomart Tokayev was elected President in June 2019 with 71% of the vote. He will have to assert his authority over his predecessor, who has obtained a veto over appointments. Moreover, while mass protests are rare in an environment where security has been strengthened owing to fears of terrorism and Muslim fundamentalism, and despite the social initiatives that have been carried out, there is nevertheless public dissatisfaction with the country’s modest economic performance and China’s economic presence.


Coface (02/2020)