Assessment of key political and economic risks in Kazakhstan

03 October 2019

Assessment of key political and economic risks in KazakhstanKazakhstan will face a number of security, investment and trading challenges in the coming months. In this article we provide a detailed forward-looking assessment of developments in the country.

Policy continuity on key economic and political issues is likely in Kazakhstan, despite the country experiencing its first post-Soviet change of president in March 2019.

Piecemeal economic reforms are expected to support growth in the medium term.

A privatization push should generate investment opportunities in key sectors, although implementation may be slow.

Security Environment

Former President Nursultan Nazarbayev’s unexpected decision to step down in March 2019 improved political stability in Kazakhstan, following years of uncertainty over his likely successor.

Nazarbayev has orchestrated an effective transition of power, with Kassym-Zhomart Tokayev taking on the position of acting president before winning June 2019’s presidential election.

Nazarbayev will continue to exert significant influence over government policy and his handpicked successor, having been appointed lifelong chair of the country’s Security Council, and chair of the ruling Nur Otan party.

Moreover, in March 2019, Nazarbayev’s daughter, Dariga Nazarbayeva, was appointed as speaker of the senate, ensuring that a dynastic succession remains possible.

In line with the constitution, Nazarbayeva would accede to the presidency if Tokayev was incapacitated.

The political transition in Kazakhstan has spurred protests. In June 2019, 500 people were arrested in Almaty and Nur-Sultan (formerly Astana), following protests criticizing the nature of the elections. Police were deployed to forcibly disperse protesters.

Assessment of key political and economic risks in KazakhstanThe size and occurrence of these protests is unusual in Kazakhstan.

However, they are unlikely to develop into a coordinated protest movement that threatens government stability. In the next 12 months, security services are expected to be able to disrupt further civil unrest, which may be concentrated in major urban centers.

This should moderate the risk of business interruption or property damage to foreign firms operating in the country.

Trading Environment

As a committed Nazarbayev loyalist, Tokayev is likely to maintain existing economic policy, focusing on the gradual implementation of a reform agenda.

The outgoing administration aimed to reduce Kazakhstan’s reliance on hydrocarbons revenues, while also boosting the role of the private sector.

In an indication of his continued commitment to these objectives, Tokayev proceeded with social spending measures that were previously announced in February 2019.

This program of spending included a 50% increase in the minimum wage and tax cuts for low-income earners. Such measures are likely to boost private consumption, which is expected to grow by 3% in 2020.

The pace of reforms has been relatively slow, and Kazakhstan faces downside economic risks from challenging conditions in the oil sector. Oil output growth is expected to slow in 2019, given maintenance-related shutdowns at the Kashagan, Karachaganak, and Tengiz oilfields in the first half of the year.

Moreover, global oil price dynamics will pose challenges, with Brent crude expected to average US$65 per barrel, down from US$71.7 per barrel in 2018.

As a result, real GDP growth is forecast at 3.6% in 2019, down from 4.1% in 2018.

Despite these headwinds, sovereign credit risks are moderate in Kazakhstan. While the government has run persistent budget deficits since the collapse in global oil prices in 2014, the debt position remains robust.

Assets in Kazakhstan’s sovereign wealth fund were equivalent to 35% of GDP at the end of 2018. Moreover, the country’s debt structure is favorable, given the long-term nature of 85% of its external debt obligations.

Investment Environment

Pricing Outlook KazakhstanThe Kazakh government aims to reduce the share of state-owned enterprises in the economy from 50% to 15% by 2020.

In November 2018, state-owned uranium miner Kazatomprom sold 15% of its stock in an initial public offering (IPO) in London and Nur-Sultan.

The sale valued the firm at US$3 billion, generating between US$400.8 million and US$451.3 million for the country’s sovereign wealth fund.

However, the pace of privatization is likely to be slow. In February 2019, it was reported that an IPO of national oil firm, KazMunayGaz, would be delayed beyond 2019, a reflection of muted investor appetite.

5 Key Takeaways

  • Former President Nursultan Nazarbayev stepped down in March 2019 after nearly 30 years in power, being replaced by Kassym-Zhomart Tokayev.
  • In June 2019, 500 people were arrested in Almaty and Nur-Sultan following protests criticizing the electoral process.
  • In the next 12 months, the security services will likely retain the ability to disrupt further incidents of civil unrest, which should be concentrated in major urban centers.
  • Tokayev is likely to maintain existing economic policy, focusing on a gradual diversification away from hydrocarbons exports.
  • Global oil price dynamics will pose challenges, with Brent crude expected to average US$65 per barrel, down from US$71.7 per barrel in 2018.

The monthly Risk Outlook is supported by our proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.

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Many of the countries featured in this month’s Risk Outlook could offer rewards for companies that are able to successfully navigate high-risk economic and political environments.

In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Egypt, TurkeyGhana and Guatemala and all of which have been the subject of recent enquiries from our client base.




  • Eleanor SmithEleanor Smith

    Eleanor Smith is a Senior Political Risk Analyst within Marsh JLT Specialty’s Credit Specialties team. At Marsh JLT Specialty, Eleanor analyses developments in political risks, and advises clients on their effect in a range of sectors. Eleanor is also responsible for delivery of World Risk Review, JLT’s country risk ratings platform, to clients and prospects.

    Eleanor has a first-class degree in History with Spanish from UCL, and a Masters in International Public Policy from the same institution. With experience in a range of sectors, including diplomatic missions and not-for-profit, Eleanor can help clients understand their risk exposure.

    If you would like to talk about any of the issues raised in this article, please contact Eleanor Smith, Senior Political Risk Analyst on +44 (0)20 8108 9544.

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