S&P downgrades Kazakhstan

Standard & Poor’s said it lowered the long-term foreign- and local-currency sovereign credit ratings on the Republic of Kazakhstan to BBB- from BBB.

The agency also said it lowered the short-term foreign- and local-currency ratings to A-3 from A-2 and the Kazakhstan national scale rating to kzAA from kzAA+.

The outlook is negative.

As a sovereign rating, the ratings on Kazakhstan are subject to certain publication restrictions, including publication in accordance with a pre-established calendar.

Deviations from the announced calendar are allowed only in limited circumstances and must be accompanied by a detailed explanation of the reasons for the deviation, S&P said.

In this case, the reason for the deviation is the recent revision of global oil-price assumptions, the agency said.

In mid-January, S&P materially lowered its oil price assumptions for the period of 2016 through 2019.

Prices for crude oil in spot and futures markets are about 70% below mid-2014 levels, when prices began to slide, the agency said.

Back in September 2015, S&P said it expected Brent oil prices to average $65 per barrel in 2016 and $75 per barrel in 2017 and beyond.

But, now the agency said it assumes an average Brent oil price of $40 per barrel in 2016 and $45 per barrel in 2016 through 2019.

Consequently, the forecasts for Kazakhstan’s economic growth, fiscal position and external position have been reassessed, S&P said.

Since Kazakhstan’s economy depends heavily on the oil sector, accounting for an estimated 20% of GDP, 50% of fiscal revenues and 60% of exports, S&P said it now expects GDP growth to stagnate or to contract modestly in 2016.

This will likely stem from weaker exports and a forecast of roughly flat oil production, as well as reduced domestic consumption due to the tenge devaluation, high inflation and weak consumer lending, the agency said.

© 2015 Prospect News.
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