S&P Global Ratings’ analysts project moderate economic growth for Kazakhstan over the next three years at 3.7% on average, which falls significantly short of the cabinet’s expectations. Experts suggest that the country could enhance its economic position through successful privatization of state assets. However, according to Halyk Finance, citing S&P Global Ratings, the process of denationalization in Kazakhstan is extremely slow.
S&P Global Ratings ranked Kazakhstan at BBB- with stable outlook. The key element to maintaining the country’s positive rating is its oil and gas industry, which accounts for 20% of the national GDP, more than 50% of exports and 30% of the government’s revenue. Analysts believe that although Kazakhstan plans to increase oil production, it won’t be enough to achieve strong GDP growth performance.
«S&P analysts believe that even with the future growth project at Tengiz in the second quarter of 2025, which is expected to boost oil output from 90 million tons in 2023 to 98 million tons in 2025, Kazakhstan’s economic growth is unlikely to surpass 4.5%. As a result, the average GDP growth from 2025 to 2027 is projected to remain at 3.7% annually,» Halyk Finance said.
At the same time, the draft document on the state budget in 2025-2027 projects GDP growth at 5.5% over the next three years.
«The agency notes that actual performance could surpass their outlook if privatization is effectively implemented, leading to an expansion of the private sector and an increase in foreign investments. However, S&P experts suggest that privatization is emerging slowly. The decision procedure remains centralized, check-and-balance system is weak, censorship still exists and corruption perception index is still high,» Halyk Finance explained.
S&P Global Ratings also indicate the following issues:
- Kazakhstan exports 80% of its oil through the Caspian Pipeline Consortium (CPC) that primarily goes through Russia. This dependence on the CPC poses geopolitical risks but is expected to continue, as developing alternative routes would require substantial investments;
- The government expenditure increase rate will stay high, at 8%-9% next year. This will result in a budget shortfall of 2.4% to GDP, despite the crude oil price increase. Additionally, lost tax revenue is forcing the government to withdraw transfer deeds from the National Fund, hindering its goal of accumulating $100 billion in the fund by 2030.
- Government debt management expenses will also grow due to the increase in domestic long-term borrowings and strict monetary conditions. Halyk Finance added that over the first six months of 2024, public debt management made 13.4% of the national budget expenditures for the same period. Analysts say that this is raising concerns and putting financial ratio compliance in doubt.
S&P Global Ratings highlights several positive factors, including Kazakhstan’s strong external net creditor position, as its investments in foreign assets exceed its external debt. The country also benefits from substantial liquid assets, such as government deposits and the external liquid assets of the National Fund.
S&P Global Ratings may improve its ranking if the reforms are implemented, the non-oil sector is boosted, geopolitical risks are mitigated and political stability is maintained.
