Shortages and sounds of alarms are resonating across key industries of Kazakhstan's economy. While authorities attempt to placate any concerns about oil and gas exports, the issues of domestic agriculture production and surging food prices have people wondering: are things going to get worse?

A favorable forecast

According to the Russian investment bank, Renaissance Capital, Kazakhstan is expected to overcome the economic challenge it is currently facing and demonstrate GDP growth of 3 to 4% in 2022.

"We are still positively estimating the long-term growth prospects for the Kazakh economy. At the same time, the expected short-term side effects from economic problems in Russia and a global deterioration of investors’ sentiments will eventually be offset by a sharp increase in commodity prices - provided that the political position of Kazakhstan remains neutral (according to our baseline scenario)."

The bank says that the recent weakening of the Kazakh tenge and, as a result, acceleration of inflation has increased the relevance of the new social tension risks.

"However, we expect that in 2022 the government will minimize such risks by directing additional oil and gas revenues to a significant increase in fiscal stimulus to the economy, but at the same time will be able to avoid destabilizing the budget," the bank noted.

Besides, according to the bank, in early March, the S&P rating agency confirmed the sovereign rating of Kazakhstan at BBB- level (with a stable outlook).

"The main factor of vulnerability for Kazakhstan in connection with the development of events around Russia is the stability of oil transit (nearly 90 percent of Kazakh oil is exported through Russia)." 

In this situation, recent comments from the US, indicating that sanctions against Russia shouldn’t affect Kazakh oil exports, are very encouraging, the bank also said.

"At the same time, the Kazakh currency (which is at 443-446 tenge, as of April 11) may stabilize in price within three to six months to 450-480 tenge per dollar. The currency is likely to strengthen more significantly, and the reality is likely to be less positive than our forecast suggests," the bank said adding that in such a situation, market participants should take a closer look at Kazakhstan.