Extreme stresses within the international monetary system have develop into obvious just lately. This has been exacerbated by the collapse of a number of banks in america and Europe, together with Silicon Valley Financial institution and Credit score Suisse. Market confidence has been shaken and central banks are between a rock and a tough place as they attempt to stability preserving inflation low and sustaining monetary stability.
Because the world makes an attempt to navigate these challenges, there’s a clear must make use of rising markets, which proper now are extra interesting compared to developed markets. There’s a good motive for this. Rising markets outperformed developed economies within the twenty years previous to the covid-19 pandemic. In its January replace to the World Financial Outlook, the Worldwide Financial Fund projected progress in rising markets and growing economies at 4.0% in 2023, 0.3 share level greater than its October projection. For 2024, the projection is for a 4.2% enlargement, which means that progress in rising markets will outpace these of developed nations.
Whereas mammoth markets like India, China and Brazil are often within the highlight, some middle-power nations are often missed. One such market is Kazakhstan, a rustic the scale of the entire of western Europe that sits proper between China and Russia. Its financial indicators have all the time been interesting, although hardly ever within the limelight. Kazakhstan’s financial system, which grew by 3.2 % in 2022, is now nearly one third greater than the economies of different Central Asian nations mixed and round 60 % of international funding within the area falls on Kazakhstan. To the shock of many, Kazakhstan’s financial system has proved resilient to the geopolitical shocks that impacted the entire area after the beginning of the warfare in Ukraine final yr and appears to have weathered the storm of hovering inflation, disrupted provide chains, and knock-on results of Western sanctions on Russia, a rustic with which Kazakhstan shares the longest uninterrupted land border on the planet.
But it’s the nation’s strategic location and its contribution to international commerce that’s of specific significance proper now amidst the damaged provide and commerce chains, a consequence of the battle in Ukraine.
Within the greater than 30 years since its independence in 1991, Kazakhstan has leveraged its strategic location as a hyperlink between China, Russia, and Europe to develop into a regional hub for commerce and commerce. For a number of years, Kazakhstan has been enjoying an necessary position within the profitable implementation of China’s Belt and Highway initiative, with many of the items passing by means of the territory of Kazakhstan. As a result of geopolitical tensions that arose following the warfare in Ukraine, the nation has now launched into the event of other routes, together with Trans-Caspian Worldwide Transport Route, a world hall that begins from Southeast Asia and China and runs by means of Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, and additional to European nations. No matter how the state of affairs in Ukraine unfolds, Kazakhstan will stay a key hyperlink within the international commerce system.
Secondly, Kazakhstan’s monetary reforms make it one of the crucial promising markets to enter within the area. In 2018, the nation established the Astana Worldwide Monetary Centre (AIFC), the regional hub for funding and inventory market improvement, which has develop into a hotbed for profitable fintech corporations.
Considerably, AIFC is the primary monetary establishment within the area to supply companies an entire and complete authorized platform that’s primarily based on the norms and precedents of English Frequent Regulation, which ensures honest and neutral selections which can be legally enforceable inside the nation, regardless of the court docket’s independence from the home judicial system.
Thirdly, Kazakhstan continues to rank first within the area by way of international direct investments. That is to be anticipated contemplating its financial stability, plentiful pure assets, robust commodity market fundamentals, political and financial reforms, in addition to 13 Particular Financial Zones with tax incentives.
The nation is conscious of its rising political and monetary position on the world stage. This June, Kazakhstan will host the Astana Worldwide Discussion board, which is able to convey collectively senior authorities representatives from all around the world and members of worldwide organisations and enterprise circles to debate methods to navigate present international challenges. The discussion board will concentrate on 4 key subjects: international coverage, safety and sustainability, power and local weather, and financial system and finance. The latter will take into account methods to get again to international progress, in addition to how Central Asia, together with Kazakhstan, can contribute to this course of.
As worldwide traders and companies proceed to return to phrases with the present challenges within the international monetary system and the slowing progress charge of developed nations, the position of rising markets like Kazakhstan will develop into extra distinguished. It has reached its candy spot, because it’s not uncharted territory for traders, whereas nonetheless providing untapped alternatives not simply within the conventional oil & gasoline sector, but additionally in mineral wealth and valuable metals, agriculture, animal husbandry, renewables, and mining industries.
Luke Rodehefer is a banker and international financial danger analyst.