Kazakhstan’s Credit-Rating Outlook Cut to Negative by S&P

Kazakhstan’s credit-rating outlook was lowered to negative from stable by Standard & Poor’s, which cited the deteriorating outlook for economic growth and the reduced effectiveness of monetary policy.

The ratings company affirmed Kazakhstan’s long-term sovereign credit rating at BBB+, the third-lowest investment grade and on par with Mexico. There’s a one-in-three chance of a downgrade in the next two years unless prospects for gross domestic product per capita improve and if the central bank is forced to intervene in currency markets, the company said today.

Kazakhstan devalued its currency by 19 percent in February to make its exports more competitive and boost economic growth to 6 percent, according to Kazakh President Nursultan Nazarbayev. Production at Kashagan, the central Asian country’s biggest oil field, was halted in October, a month after output began, because of defects found in pipes.

“Growth could remain below previous expectations for instance due either to prolonged delays of production at the Kashagan field or a lack of structural reform to support long-term sustainable and inclusive growth,” S&P said.

A lower rating may be warranted if “the limitations on monetary policy effectiveness, in part resulting from the nationalization of the pension funds, as well as the tight exchange-rate management, were to result in the central bank being required to intervene heavily in the foreign exchange market,” the ratings company said.

GDP growth will slow to 4.5 percent in 2014 because of lower oil production, steady crude prices and regional tensions, including a slowdown in Russia, S&P predicted.

Global bond yields showed investors ignored 56 percent of Moody’s and 50 percent of S&P’s rating and outlook changes in 2012, more often disagreeing when the companies said governments were becoming safer or more risky, data compiled by Bloomberg show.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Andrew Langley, Fergal O’Brien

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