As the key rating drivers, FITCH pointed to Kazakhstan's 'BBB' IDRs strong public and external balance sheets, underpinned by large government savings and a substantial sovereign net foreign asset position, against high commodity dependence, a weak banking sector, weak World Bank governance indicators and higher inflation than 'BBB' peers.
Higher average oil prices and increased production contributed to strong economic growth in 2018 at 4.1%, versus a five-year average of 2.9%. The current account balance improved substantially in 2018, due to higher oil exports and supportive terms of trade and turned into a small surplus at an estimated 0.5% of GDP. Net external debt is more than twice that of the current 'BBB' median but decreased to 16.6% of GDP (23.6% in 2017). Kazakhstan's sovereign external balance sheet remains a key rating strength with sovereign net foreign assets at 43.8% of GDP at the end of 2018. General government debt decreased to an estimated 19.4% of GDP in 2018 (19.9% in 2019).
The banking sector clean-up has continued in 2019 and the regulatory framework improved, with the NBK removing the license of three small banks for failing to meet capital requirements in 2018. However, the overall health of the sector remains weak. Dollarization remains high relative to 'BBB' rated peers and accounted for 48% of total deposits at the end of 2018 and 26% of loans.
Inflation moderated to 5.3% in December, but higher than the current 'BBB' median of 2.8%. Human and financial development indicators are broadly in line with 'BBB' medians, but the World Bank's governance indicators, albeit improving, remain relatively weak, partially reflecting the centralization of powers in the presidency.
The detailed report can be found here.