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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT APRIL 2007
KAZAKHSTAN STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment
Mr. Nazarbayev will remain in power until the
2012 election, but evidence of persistent
conflicts within the elite supports the view
that his current seven-year term will be his
last. The issue of the eventual succession
will therefore dominate Kazakh politics for
the foreseeable future, with some risk that
Mr. Nazarbayev might not see out his full
term. The rivalry between groups jockeying
for position within the president's close
circles poses risks to our central outlook.
Kazakhstan seeks to chair the Organization
for Security and Co-operation in Europe
(OSCE), and has passed a few political
reforms to appease international critics of its
bid. The organization’s monitors delivered an
unfavorable report on the conduct of the
2005 presidential election, and recent highprofile
murders of opposition leaders have
deepened concerns over the political
situation in Kazakhstan. These factors are,
however, offset by improving relations with
the US–in turn driven by the latter's loss of a
base in Uzbekistan and consequent need to
strengthen ties with the remaining Central
Asian states. Cordial relations with the US
should ensure the success of Kazakhstan's
chairmanship bid.
Mr. Nazarbayev opened his new term in
office with a pledge to put Kazakhstan
among the 50 "most competitive" countries in
the world, through economic modernization,
diversification and a "modern" social policy.
The president instructed the government to
work out the details for achieving these aims,
but he also criticized various failings at
ministerial level, most of which were related
to the need to streamline the state
administration. He also named as policy
priorities the fight against inflation, a closer
monitoring of rising external debt and
stronger anti-monopoly supervision.
Economic Performance
Real GDP grew by 9.3% year on year in the
first half of 2006, implying a much stronger
rate of expansion year on year in April-June,
of nearly 11%, than had been assumed in
the quarterly profile. Furthermore, industrial
output data for January-August show an
ongoing recovery in oil production after a
difficult winter and disruptions to key projects
earlier in the year. Consequently, it is now
expected that real GDP will show growth of
9.5% in 2006. The pace of expansion will
decelerate to 9.2% in 2007, largely owing to
base effects, but it will pick up again in 2008
on the back of the Kashagan oilfield's
coming on stream that year. Although a later
start, in 2009, is possible, the project is at a
stage where it will necessitate strong
investment inflows even if there are delays.
Consumer prices in Kazakhstan are subject
to inflationary pressure from various sources.
An insufficiently tight fiscal stance in
2005–particularly its impact on public-sector
wages–and massive foreign-exchange
inflows are the two most salient drivers of
inflation, but high oil prices have also exerted
considerable upward pressure on producer
prices. These trends will continue in 2007-08.
Although the government is pursuing
cautious fiscal policies overall, the president
has pledged public-sector wage increases
for 2007 that will sustain existing inflationary
pressures on the demand side. The lagged
effects of tighter monetary and credit
policies, together with a strengthening
nominal exchange rate, should nonetheless
help to bring consumer price inflation down
over the forecast period.
The NBK's shift in 2004 to prioritizing price
stability rather than exchange-rate policy
resulted in an immediate and significant
appreciation of the tenge in real effective
terms, indirectly confirming that the NBK had
been making a considerable effort to keep
the currency on a trend of depreciation.
This has become especially evident in 2006,
as international oil prices have surpassed
US$ 70/b. It is expected that the trend of
appreciation to continue over the remainder
of the year and in 2007-08, especially as the
NBK has agreed with the IMF's
recommendation of greater exchange-rate
flexibility. Nominal appreciation, together with
persistently high inflation, will ensure steady
real effective appreciation over the forecast
period and beyond.*
* The Economic Intelligence Unit Ltd., October 2006
Key Information Contacts
Financial Institutions' Association of Kazakhstan www.afk.kz/eng/
National Bank of Kazakhstan www.nationalbank.kz
Ministry of Finance of the Republic of Kazakhstan www.minfin.kz
Central Securities Depository www.csd.kz/ru
Kazakhstan Agency for Financial Market and Financial Organizations Regulation And Supervision www.afn.kz
2005-ORIGINS OF GROSS DOMESTIC PRODUCT (%)
Industry Trade Transport & communications
Construction Agriculture Other
2004-COMPONENTS OF GROSS DOMESTIC PRODUCT (%)
Private consumption Public consumption Gross fixed investment
Change in stocks Net exports
30.9
12.8
12.1
7.7
60
50
40
53.5
6.7
30
25.1
29.8
20
10
11.6
8.7
0
1.0
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