ASTANA, Kazakhstan, September 9. Moody's Ratings (Moody's) has upgraded the government of Kazakhstan's long-term local and foreign currency issuer ratings to Baa1 from Baa2 and changed the outlook to stable from positive, Trend reports.
The agency's ranking is the highest it has been throughout the republic's independence.
The rating upgrade is a result of the persistent diversification of the economy and the positive changes in policy and institutions.
The stable outlook reflects balanced risks. On the upside, ongoing institutional and economic reforms may raise Kazakhstan's attractiveness as an investment destination and accelerate the progress of economic diversification beyond our current expectations. In turn, the higher growth potential of the economy and increased diversity of growth drivers will strengthen Kazakhstan's credit profile further. On the downside, a significant deterioration in regional geopolitics and the potential for secondary sanctions continue to be key risks.
Moody's expects the non-oil sector to materially lessen Kazakhstan's economic dependence on hydrocarbons. Over the past year, non-oil sectors continued to underpin growth, with notable performance from the ICT, transport, and manufacturing sectors.
The rating agency noted that developments in the transportation and logistics sector continue to be one of the key drivers of growth and diversification, driven by rapid growth in cargo transit activity across the Trans-Caspian International Trade Route (TITR, or Middle Corridor). Stronger prospects for the Middle Corridor and shifts in regional supply chains away from Russia helped to foster greater foreign investor interests in other non-oil sectors as well, with sizeable foreign investments into car production, pharmaceuticals, food processing, and construction materials.
At the same time, Kazakhstan benefits from growing global demand for critical raw materials with several agreements signed with advanced economies such as Singapore, the UK, and Germany on exploration and mining projects in the Central Asian country.
Meanwhile, the government continues to advance efforts in improving the business climate and attracting investments.
Moody's expects Kazakhstan's economic and diversification prospects to remain strong, in particular more significant than for similarly-rated hydrocarbon producers. Repercussions of the war in Ukraine had led to a structural shift in trade and investment flows in the region, which Kazakhstan has effectively capitalized upon and will likely continue to benefit from. Should ongoing institutional and economic reforms sustain, consequent improvements in the business environment would further strengthen Kazakhstan's economic competitiveness.
In addition to this, strong fiscal indicators will continue to be the backbone of Kazakhstan's credit profile, marked by low debt and high debt affordability compared to other countries. Moody's expects Kazakhstan to keep its nose to the grindstone when it comes to fiscal prudence, where the government will continue to keep its spending in check with relatively modest republican deficits of around 2.5–3 percent of GDP over the medium term.