Kazakhstan: Country Outlook

FROM THE ECONOMIST INTELLIGENCE UNIT

The president, Nursultan Nazarbayev, will stay in power in 2008-09, having consolidated his hold on Kazakhstan’s political structures, but could face growing dissatisfaction among businesses owing to the slow pace of reforms. Rising inflation and liquidity problems in the banking sector will be among the government’s main policy challenges in 2008-09. The National Bank of Kazakhstan (NBK, the central bank) might be forced to raise the refinancing rate from 11% if inflation remains higher than targeted. The Economist Intelligence Unit forecasts real GDP growth of 6.7% in 2008, rising to 7.1% in 2009. This is much slower than in recent years, and reflects the dampening effect of the global credit squeeze on Kazakhstan’s growth. High food prices and a loosening fiscal policy will exert upward pressure on consumer prices, pushing average annual inflation upwards to over 17% in 2008, from 10.8% in 2007. Disinflation should take hold in 2009. The possibility of more sustained downward pressure on the currency has risen, and greater volatility than in recent years is likely. The current-account deficit should narrow in 2008 because of higher oil prices, but it will widen again from 2009 owing to rising invisibles debits.

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