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Kazakhstan and Central Asia Country Risk Report Q3 2017

Core Views

The Kazakh economy is past the worst, with a rebound in oil pricesoffering support for the tenge, mitigating inflationary pressures, andallowing for monetary policy easing in the coming months. Strongsovereign position will prevent a collapse of the banking system.

Continued investment in the infrastructure sector will provide domesticsupport for Kyrgyzstan's economy while we expect remittanceinflows into the country to rise steadily on the back of an improvingRussian economic outlook. However, the upcoming presidentialelection continues to present downside risks amid ongoing politicaluncertainty. We therefore maintain our 2017 real GDP forecast forgrowth to pick up to 2.3% (from 1.0% in 2016).

Economic conditions in Tajikistan will deteriorate in 2017 as thecountry will be undermined by a weak banking system, tighter monetarypolicy, and a significant reliance on remittances from Russia.

We expect Turkmenistan to continue to face growth headwinds asit struggles to cope with the fallout from the stalling of the D line gaspipeline as well as domestic structural issues. However, continuedconstruction will provide a degree of support. We therefore maintainour real GDP growth forecast for 2017 to come in at 5.1%, markinga considerable slowdown from the 11.0% averaged from 2010-14.

Following a better than expected performance of 7.8% in 2016, weare upgrading our forecast for Uzbekistan's real GDP growth tocome in at 8.0% and 8.1% in 2017 and 2018, respectively. Factorssupporting our positive outlook include an increase in investmentactivity led by infrastructure projects, an improving external sector,and signs of market-oriented economic reforms.


Executive Summary – Kazakhstan
Core Views
Key Risk
Chapter 1.1: Economic Outlook – Kazakhstan
Economic Growth Outlook
Broad Based Recovery Ahead
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
KZT: Improving Fundamentals Drive Further Appreciation
TABLE: BMI CURRENCY FORECAST
Chapter 1.2: 10-Year Forecast – Kazakhstan
The Kazakh Economy To 2026
Developing Non-Oil Sectors Key To Sustaining Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 1.3: Political Outlook– Kazakhstan
Domestic Politics
Constitutional Reforms Will Not Democratise Political System
Chapter 1.4: Operational Risk – Kazakhstan
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: FREE TRADE AGREEMENTS
TABLE: TARIFF AND NON-TARIFF BARRIERS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Education
TABLE: KAZAKHSTAN AND OECD AVERAGE STUDENT PERFORMANCE SCORES, 2012
Chapter 2.1: Economic Outlook – Kyrgyzstan
Economic Growth Outlook
Infrastructure Investments To Be Positive For Growth
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
Contents
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Chapter 2.2: Political Outlook – Kyrgyzstan
Domestic Politics
Opposition Leader's Arrest Raises Instability Risk
Chapter 3.1: Economic Outlook – Tajikistan
Economic Growth Outlook
Growth Weakness Not Yet Over
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Chapter 3.2: Political Outlook – Tajikistan
Domestic Politics
Security Threats To Remain Elevated
Chapter 4.1: Economic Outlook – Turkmenistan
Economic Growth Outlook
Growth To Slow Amid Persistent Headwinds
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Chapter 4.2: Political Outlook – Turkmenistan
Domestic Politics
Incumbent's Presidential Victory Boon For Stability, Bane For Reforms
Chapter 5.1: Economic Outlook – Uzbekistan
Economic Growth Outlook
Growth Upgrade Following 2016's Outperformance
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Chapter 5.2: Political Outlook – Uzbekistan
Domestic Politics
Reform Prospects To Improve Gradually
Chapter 6: BMI Global Macro Outlook
From Reflation To Disappointment
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: KAZAKHSTAN & CENTRAL ASIA – MACROECONOMIC DATA & FORECASTS

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