Slow recovery as balance sheets repaired
Overview:
The Anti-Crisis Program is helping to cushion the economic downturn but the rebound is, nevertheless, likely to be modest given that the private sector is still trying to rebuild its battered balance sheet. The fiscal deficit is sustainable, public debt very low and the value of the National Oil Fund still very considerable despite the ongoing draw-down of its assets. Inflation is low even after the 25% devaluation of the Tenge at the beginning of the year. The current account has returned to deficit despite this currency adjustment. This is a concern given that the external debt to GDP ratio has already risen above 90% following the devaluation. The currency is stable at its new pegged rate of 150 to the US$. An increase in capital inflows is more than offsetting the current account deficit and FX reserves are, thus, rising modestly.