Event

On 26 April, President Nazarbayev won 97.7% of the vote in the early presidential election. He reappointed Karim Masimov as prime minister. Nursultan Nazarbayev has been in power since Kazakhstan’s independence. As the president is aging (74 years old) and reported to suffer from cancer, the main question concerns his succession rather than his re-election. Indeed, he has no clear successor and he is widely seen as the man who can assure political stability.

Impact on country risk

Presidential elections were held ahead of schedule amid economic crisis and geopolitical tensions (conflict in Ukraine). Indeed, the country was hit hard by the sharp drop in oil prices which accounted for up to 60% of current account receipts and the rouble depreciation. The real GDP growth is expected to slow down to 2% this year compared to a growth of 4.3% in 2014. More worrying is that the current account is expected to plunge into deficit (of 4.1% of GDP) after having posted a surplus of 1.6% in 2014. Now that elections are finished, the authorities are likely to devalue the domestic currency, the tenge. Indeed, most competitive Russian goods are flooding across the country despite authorities’ attempts to stop their inflows, putting Kazak producers under pressure. A sharp devaluation would affect the highly dollarised banking sector which is still recovering from the severe 2008 banking crisis. As a deterioration of the liquidity is expected, Credendo Group downgraded its short-term political risk (which represents the liquidity) in March from category 2 to category 3. The MLT political risk is still constrained by, among other things, the high reliance on oil exports and a heavy external debt burden.

Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com