Kazakhstan: Macroeconomic Overview Essay

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Kazakhstan: Macroeconomic Overview
Kazakhstan is classified as a continuous transcontinental country located in Central Asia. The country recently gained independence from USSR in 1991 and has a population of 17 million; mostly ethnic Kazakhs and Russians. Politically, the country is a unitary republic and the first (and only) President is Nursultan Nazarbaev - who rules the country in a less than democratic fashion. With an area of 1 million square miles, it is 9th largest country in the world, larger than all of Western Europe. It has borders with Russia, China, Kyrgyzstan, Uzbekistan, Turkmenistan, and adjoins a sizeable part of Caspian Sea. The country is naturally rich in minerals and the extractive industry contributes to majority of
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The per capita GDP has risen from $1,078 to $5,200 on the back of strong exports and GDP growth has stabilized to around 5%. The country credit ratings are currently around 57% and the S&P foreign currency rating is BBB+, which is investment grade – implying that the country has adequate capacity to meet its financial obligations. However, adverse economic conditions are more likely to lead to weakened capacity. However, the country still presents a substantial macroeconomic risk. The country risk premium is around 800 basis points, ranks 140th in the corruption perception index, ranks 50th in ease of doing business (not bad) and is among the bottom 12% in the regulatory quality index. Its dependence on oil, less-than-democratic political structure and the influence of its neighbors, means that the country has quite some work to do before stabilizing.
Kashagan Oil Fields
Lying in the west of the country, on the northern shores of the country, Kashagan is one of the biggest oil discoveries till date. The field covers an area of 1316 square miles and contains an estimated 50 billion barrels of oil, although only about 11 billion maybe recoverable. When the field is fully functional, the oil revenues will catapult the country into big oil’s premier league (Exhibit 1), effectively put Kazakhstan into the No.4 spot, in terms of daily barrel production. This project has the potential to increase oil exports of the country from 1.6m barrels/day to 2.7m
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