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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006
KAZAKHSTAN STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment
Mr. Nazarbayev has weathered criticism of
his December 2005 re-election, which was
widely perceived as flawed by international
observers. However, evidence of persistent
conflicts within the elite supports the
widespread perception 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.
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 organisation'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
Preliminary estimates put real GDP growth at
7.7% year on year in the first quarter of 2006,
compared with 9.1% year on year in January-
March 2005. Growth will accelerate over the
remainder of the year on the back of high oil
prices, as these will continue to support the
expansion in domestic consumption. Growth
forecast for private consumption have been
revised upwards on the basis that nominal
wages have continued to rise at over 20%
year on year for longer than expected.
Consumer prices in Kazakhstan are subject
to inflationary pressure from various sources.
An insufficiently tight fiscal stance–
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. It is therefore very unlikely that
inflation will end the year within the
government's desired target range of
5.7-7.6%. 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 in 2007, and easing oil and
metals prices that year will also bring
producer price disinflation.
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. The tenge appreciated against the
US dollar by nearly 13% in nominal terms
from the start of 2006 to end-June, a trend
expected to continue over the remainder
of the year and into 2007. Nominal
appreciation, together with persistently high
inflation, will ensure steady real effective
appreciation.*
* Economic Intelligence Unit Ltd., July 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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