Project macroeconomic overview

1.

Project macroeconomic overview
Astana, 28 August 2015

2.

Kazakhstan – General economic overview
Kazakhstan is the largest economy in Central Asia and one of
the fastest-developing economies in the CIS
Pavlodar
Kostanay
The main economy driver is prices for energy resources and
metals (app. 80% of total exports)
A comparatively low pubic debt-to-GDP ratio (15.5% in 2014)
Low unemployment (a stable level for many years)
During the past decade Kazakhstan demonstrated strong real GDP
growth rates of 7.4 % on average (1998-2014)
Kazakhstan in figures
Uralsk
Astana
Semipalatinsk
Ust-Kamenogorsk
Aktyubinsk
Karaganda
Atyrau
Taldykorgan
Aktau
Kyzylorda
Almaty
Taraz
Shymkent
The estimated GDP growth rate in 2015 is 1.5-2.0%
General information
Kazakhstan has a large natural resources base:
> 30 bln bbl proved oil reserves (ranked 12th in world)
Area
Capital
Currency
2,7 mln km2
Astana
Tenge (KZT)
Population
Population size, 1 August 2015
Unemployment rate, 2014
17,5 mln
5,0%
Gross domestic product
> 1.5 trillion m3 proved natural gas reserves (19th)
> 0.6 mln tonnes of recoverable resources of uranium (2nd)
Total GDP, 2014
GDP per capita, 2014
GDP real growth rate, 2014
Source: Kazakhstan Statistics Committee
208,6 USD bln
11,9 USD‘000
4,3%

3.

GDP – Current level and output structure
Kazakhstan has the second-largest GDP in the CIS
Second-largest GDP per capita in the CIS
GDP per capita at purchasing power parity prices more than
double GDP per capita in current prices*
The raw materials sector is the foundation of the economy.
More than 40% of GDP output in 2014 was generated by mining
(natural resources), trade and industry
Kazakhstan GDP compared with other countries, 2014
Russia
Poland
Kazakhstan
Czech Republic
Romania
Hungary
Ukraine
Azerbaijan
Croatia
Bulgaria
1,861
548
209
132
75
0
500
1,000
1,500
2,000
USD bln
Kazakhstan GDP breakdown, 2014
Natural resources
15%
Other sectors
27%
Trade
16%
Agriculture
4%
Professional
activities
4%
Construction Transport
8%
6%
Kazakhstan GDP per capita compared with other countries, 2014
Manufacturing
10%
Real Estate
8%
Czech Republic
Poland
Hungary
Croatia
Russia
Kazakhstan
Romania
Azerbaijan
Bulgaria
Ukraine
19.1
13.1
12.0
7.9
7.8
2.9
0
5
10
USD '000
Source: Kazakhstan Statistics Committee
Source: Economist Intelligence Unit (EIU)
15
20
25

4.

GDP trends and forecasts (1/2)
70
60
50
40
30
20
10
-
7.3%
7.5%
Historical data
Forecast
6.0%
5.0%
4.3%
3.3%
1.5%
3.6%
4.1%
2.2%
8%
7%
6%
5%
4%
3%
2%
1%
0%
The real GDP compound average growth rate (CAGR)
in 1998-2014 was 7.4%
GDP growth slowed in 2014 (from 6% in 2013 to 4.3%
2014)
2010A 2011A 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Nominal GDP
Real GDP growth rate
Note:
A-Actual, F-forecast
Source: Statistics Committee, Kazakhstan Economic Ministry
GDP per capita trends and forecast
25.0
15.0
8.6
10.9
11.7
13.0
12.0
11.2
10.8
11.5
27.9
26.5
25.1
24.3
23.7
23.6
22.2
21.1
19.9
18.3
20.0
10.0
Forecast
Historical data
30.0
USD '000
trillion tenge
Nominal GDP and real growth rate
12.2
13.5
5.0
0.0
2010A 2011A 2012A 2013A 2014A 2015F
GDP per capita (in current prices)
2016F
2017F
2018F
2019F
GDP per capita (at PPP)
Source:
Economist Intelligence Unit (EIU)

5.

GDP trends and forecasts (2/2)
In 2015 leading agencies and institutes decreased their forecast
Kazakhstan GDP growth rates for 2015-2016 due to a worsening
of the politic and economic situation in the region. Forecast
GDP medium-term growth rates (2017-2019) rise tо 3-4%
GDP trends – forecasts overview
Historical data
Forecast
7.5%
8%
7%
6.0%
6%
4.6%
6.2%
5%
4.4%
3.2%
5.0%
4%
4.3%
4.1%
3%
3.6%
3.3%
2%
2.2%
1%
1.5%
0%
2010A 2011A 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Various sources (Bloomberg, IMF, the World Bank, the EIU, the
Kazakhstan Statistics Committee) estimated the economic growth
rate in 2015 to be in the range of 1.4-2.0%, with the consistent
recovery thereafter
Based on EIU forecasts, Kazakhstan economy growth rates both Source:
in the short and long term will exceed the GDP growth rates of
the largest CIS economies (Russia, Azerbaijan)
Committee on Statistics
IMF
World Bank
EIU
Statistics Committee , Kazakhstan Economic Ministry World Bank (Global Economic Prospects,
June 2015), IMF (World Economic Outlook Database, April 2015), EIU as at 1 June 2015
Recovery factors
Potential risk factors
Higher oil production – doubling output by 2030
Weak commodity revenues
Stronger global economy – global GDP growth is forecast to
accelerate to ~3% a year in 2016-19, with the EU picking up and
Russia recovering
Disorderly Greek exit from the Eurozone
Continued policy support – state revenues will increase as oil
revenues gradually recover

6.

Public finances
Based on Kazakhstan Ministry of Economics forecasts, the
country’s debt-to-GDP ratio will decline from 2.2 % in 2015 to
1.7% by 2017 and to 1.4 % by 2020
A low pubic debt-to-GDP ratio: 15.5% in 2014 (forecast for
2015-2019: 18.0-18.3%)
Government budget balance
12.0
3.5%
8.0
3.0%
3.0%
3.0%
10.0
trillion tenge
The Kazakhstan budget has been in deficit since 2009
2.7%
2.5%
2.1%
6.0
2.5%
2.1%
2.0%
1.7%
4.0
2.0%
1.5%
1.0%
2.0
0.5%
0
0.0%
2010A 2011A 2012A 2013A
Budget revenues
Source:
Kazakhstan Economic Ministry
2014F
2015F
2016F
Budget expenditures
2017F
Deficit
budget deficit / GDP

7.

Investment attractiveness
Kazakhstan’s sovereign ratings have improved during the past
15 years (except for the 2008-2009 crisis years)
The country has an investment-grade credit rating
Kazakhstan credit ratings for the last 15 years
Despite problems in the economy, there were no rating changes
after February 2015. This reflects that the domestic economy is
strong, due to high foreign currency reserves and a low public
debt-to-GDP ratio
Foreign currency long-term debt ratings for Kazakhstan
BBB+/Baa1
BBB/Baa2
Agency
Moody's
S&P
Fitch
BBB- /Ba1
BB/Ba2
BB- /Ba3
B+/B1
B/B2
Note: As at 26 August 2015
Source: Bloomberg
Moody's
Source: Bloomberg
S&P
FITCH
Rating
Baa2
BBB
ВВВ+
Outlook
Stable
Negative
Stable

8.

Foreign currency reserves and exchange rates
Foreign currency reserves and exchange rates
200
USD blln
100
84
80
60
40
90
102
72
97
190
186.8
180
170
179.2
55
152.1
147.4
146.6
160
149.1
KZT/USD
120
150
20
140
0
2010
2011
2012
FX monetary and gold reserves
2013
2014
FX fiscal reserves
130
Jul-15
KZT/USD
Note: Annual data reflects the average figures for the period
Source: National Bank of Kazakhstan
Domestic currency exchange trends
140
130
120
110
100
90
80
70
60
50
40
Exchange rates on certain dates
Dec 31, 2010 = 100
20 August 2014 –
tenge devaluation by 26%
KZT/USD
KZT/EUR
February 2014 – tenge
devaluation by 19%
2011
2012
Tenge
2013
Russian Rouble
Source: Analysis based on Bloomberg data
Exchange rates
2014
2015
Oil price (Brent)
31 Dec 2013
153.6
211.2
Source: National Bank of Kazakhstan
31 Dec 2014
182.4
222.0
21 Aug 2015
255.3
284.2

9.

Inflation / interest rates / investments
The National Bank’s policy is to curb inflation to be within a 6%8% corridor
Since 2012 direct investments have been falling in Kazakhstan.
However they are expected to increase in the energy sector due to
the launch of Kashagan oil field exploration and construction of a
fourth oil refinery
71% of fixed capital investment comprises internal investments
Direct investments inflow and foreign debt dynamics
13.8
200
USD bln
Inflation in 2014 reached 7.4% (2.6% higher than in 2013)
13.6
15
9.9
150
7.6
100
6.4
6.5
7.1
8.2
9.1
5
50
124
0
136
148
157
156
154
160
170
181
2011A 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Total foreign debt (left axis)
Inward direct investment (right axis)
Source: EIU
Inflation (consumer prices)
18.8%
20%
18%
16%
14%
12%
9.5%
8.4%
7.8% 7.4%
10% 7.5%
7.4% 7.0%7.0%7.0%7.0%7.0%
6.2%
6.0%
8%
4.8%
6%
4%
2%
0%
Consumer prices , end-period
Note: National Bank of Kazakhstan
Source: Kazakhstan Statistics Committee
10
Interest rates
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Interbank interest rates
Interest rate for long-term loans to the non-financial institutions
Policy rate
Note: February-June 2015 data for interbank loans is not available
Source: National Bank of Kazakhstan
-
USD bln

10.

Almaty economy overview (1/2)
Largest city in Kazakhstan. Before 1997 was the country’s capital
Developed infrastructure: a metro (in operation since 2011) and an
international airport
Foreign investment in the Almaty economy in 2014 was KZT6.7 bln
or USD37 mln (1.3% of total city investments)
Almaty GRP is as twice as high as the GDP level for Kazakhstan
The average monthly salary in Almaty is KZT155.2 ths. (USD866)
Almaty in figures
С
Ю
USD'000
GRP of Almaty
35
30
25
20
15
10
5
0
32
26
23
19
12
11
9
2010
2011
GDP per capita
Source:
29
2012
14
2013
GRP of Almaty per capita
Statistics Committee of Almaty
13
2014
Population
Population, 1August 2015
Density, 1 July 2015
Labour force
Unemployment rate, 1st quarter 2015
Gross regional product
GRP, 1st quarter 2015
GRP per capita, 2014
Real GRP growth, 2014
Source:
Statistics Committee of Almaty
1.67 mln
2.46 ths. persons / km2
0.88 mln
5.4%
1,65 mln
11.9 USD‘000
7.1%

11.

Almaty economy overview (2/2)
Population's incomes and inflation
GRP growth rates
25%
15.0%
15%
20%
15%
14%
12%
10.4%
10%
10%
10%
9.6%
7.1%
5.9%
5%
5%
7.3%
7.5%
5.0%
0%
-5%
2010
Inflation
Source:
9.7%
10%
2011
2012
Nominal wages
2013
2014
Cash-based population's incomes
Statistics Committee of Almaty
0%
2010
2011
Kazakhstan
Source:
2012
6.0%
2013
4.3%
2014
Almaty
Statistics Committee of Almaty, Statistics Committee of the Republic Kazakhstan
Budget of Almaty City
469
500
tenge bln
400
425
363
344
382
354
1%
4% 6%
28%
300
budgetary subsidies and loans
tax revenue
200
469 KZT bln
100
revenue from property sale
0
61%
2012
2013
Expenditures
Source:
non-tax revenue
Official internet-resource of Almaty City
Revenues
2014
other revenue

12.

Legal framework as part of the investment climate (1/2)
Summary of adopted legal amendments to concession legislation since 2009
Law of the Republic of Kazakhstan “On
Concessions”, adopted in 2006
Negotiation of the draft law, establishing
other types of PPP («PPP Law» draft)
A number of recent legal amendments were
made to protect investor rights
Amendments to the Budget Code concerning compensation for operating costs
and fees for the availability of the concession
Introducing the option to conclude a direct agreement between the public
partner and investors and creating a mechanism for replacing a concessionaire
(direct control)
Introducing FX risk mitigation through the adjustment of availability payments
After being amended, the law on project finance and securitisation allows
"selected assets" to be created. These are not subject to distribution as part of a
bankruptcy and can be transferred to the next concessionaire in the event of
bankruptcy
Introducing the use of international arbitration in the event of a dispute
between resident entities
The provision of termination payments brought into line with best practices

13.

Legal framework as a part of investment climate (2/2)
List of regulations concerning concession projects:
Law No.176-III of the Republic of Kazakhstan “On
Concessions”
Budget Code Provisions of the Republic of
Kazakhstan concerning concession, rules of cofinancing concession projects, and compensation for
investments costs
Minister of Finance Order No. 642 dated 30
December 2008 of the Republic of Kazakhstan
“Concerning the Rules of Accepting Concession
Objects Into State Property”
Order No.78 dated 26 February 2014 of the Minister
of Finance of the Republic of Kazakhstan “On
Approving the Rules of the Transfer of Ownership
and Use of the Concessionaire Concession Objects
Owned By the State”
Order No.133 dated 26 February 2015 of the Minister
of Finance of the Republic of Kazakhstan “On
Approving the Rules of Maintaining a Ledger of
Concluded Concession Agreements and Granted State
Guarantees”
Regulations on concession limits

14.

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