Key developments and challenges

Gross domestic product (GDP) growth is strong but slowing down in 2012. The deceleration of growth, to 5.6 per cent year-on-year in the first half of 2012, is largely explained by the poor performance in mining and construction, in part because of the unusually cold winter.

The banking sector remains weak. Non-performing loans (NPLs) now exceed 30 per cent of total loans, while provisioning for NPLs remains sufficient according to official data. The third largest bank, BTA, started negotiations on a second debt restructuring in January 2012.

Further progress was made with regional economic integration. Following the establishment of a customs union between Kazakhstan, Russia and Belarus in 2010, the three countries launched the next stage of economic integration – towards a common economic space – in January 2012.