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Kazakhstan and Central Asia Country Risk Report Q1 2016

Kazakhstan and Central Asia Country Risk Report Q1 2016

Core Views

Kazakhstan announced an ambitious privatisation programme, which is an important signal by the political establishment's willingness to embark on a market-friendly reform course. While high indebtedness and restructuring needs might impede swift implementation of the programme, it undoubtedly bodes well for the country's medium-to long-term economic development and diversification prospects.

President Almazbek Atambayev's Social Democratic Party (SDPK) will head the next government following the October 4 election, presaging continuity in economic and foreign policy. Its main challenges will be fighting corruption and mitigating externally generated economic headwinds caused by falling remittances and lower commodity prices.

Recent events in Tajikistan have confirmed our view that the deteriorating macroeconomic outlook would prompt the political and security establishment to intensify its authoritarian approach to real or perceived dissenting voices. This approach will backfire, fomenting even larger-scale resistance and even religious radicalisation, fostering a fertile ground for the spread of radical Islamism and for both bottom-up and intra-elite challenge to the regim.

The decision by the Turkmen authorities in the wake of lower hydrocarbon prices to dismantle core welfare benefits has signalled that the government may have a much more limited tolerance for a drop in gas export revenues than we previously anticipated. This means that the risk of manat devaluation over the next two years has materially increased, prompting us to readjust our forecast for the unit to average TMT3.6/USD in 2016, from TMT3.5/USD previously.

Central Asia is shaping as a region of growing geopolitical rivalry between global powers, whose attempts of the latter to curry favour with regional leaders will only cement further the autocratic tendencies of their regimes, putting political and economic liberalisation in the region further out of reach.

Major Forecast Changes

An unprecedented in its scale and scope round of privatisation announced by the Kazakh leadership has prompted us to adopt a moderately more optimistic outlook on the country's medium-to long-term economic development and diversification prospects, reflected in our modest upward real GDP growth revisions.


Executive Summary
- Regional
Core Views
Major Forecast Changes
Key Risks
Chapter 1.1: Political Outlook - Kazakhstan
Domestic Politics
Privatisation Plan: A 'Great Gain' Or A 'Great Game'?
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Post-Nazarbayev Era: Managed Transition The Most Likely Scenario
Chapter 1.2: Economic Outlook - Kazakhstan
Economic Growth Outlook
State Aid To Help But Only In The Short Term
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 1.3: 10-Year Forecast - Kazakhstan
The Kazakh Economy To 2024
Developing Non-Oil Sectors Key To Sustaining Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 1.4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
Education
TABLE: EMERGING EUROPE - EDUCATION RISK
TABLE: TOTAL GRADUATES OF TERTIARY EDUCATION ('000), 2001-2012
Government Intervention
TABLE: EMERGING EUROPE - GOVERNMENT INTERVENTION RISK
Chapter 2.1: Political Outlook - Kyrgyzstan
Domestic Politics
General Elections Bringing Little In The Way Of Change
Chapter 2.2: Economic Outlook - Kyrgyzstan
Economic Growth Outlook
Recovery To Gain Speed In 2016
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 3.1: Political Outlook - Tajikistan
Domestic Politics
Crackdown On Opposition A Sign Of Growing Weakness
TABLE: POLITICAL OVERVIEW
Chapter 3.2: Economic Outlook - Tajikistan
Economic Growth Outlook
Retaining Our Bearish Outlook
TABLE: ECONOMIC ACTIVITY
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 4.1: Political Outlook - Turkmenistan
Domestic Politics
Drastic Measures Against Gas Price Drop Off The Table For Now
TABLE: POLITICAL OVERVIEW
Chapter 4.2: Economic Outlook - Turkmenistan
Economic Growth Outlook
Manat Devaluation Likely In 2016
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 5.1: Political Outlook - Uzbekistan
Domestic Politics
Growing Geopolitical Significance Pushing Liberalisation Out Of Reach
TABLE: POLITICAL OVERVIEW
Chapter 5.2: Economic Outlook - Uzbekistan
Economic Growth Outlook
Bearish Macro Outlook Materialising
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 6: BMI Global Macro Outlook
Global Outlook
Exit The Dragon
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %

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