Kazakhstan

More moderate growth in 2024, picking up again in 2025

Growth will moderate in 2024 before picking up again in 2025. Growth will be driven by consumption (63% of GDP in 2023), particularly household consumption. Gross fixed capital formation (30% of GDP in 2023) will also make a positive contribution. For several years, investment has been making a greater contribution to GDP growth, but industry's share is tending to decline (45% in 2023, compared with 48% in 2022) in favour of service activities such as transport and warehousing. The bulk of investment will take place via company funds (72% in 2023), but some will be included in the state budget (16% in 2023). Net exports will have a positive impact on growth, mainly thanks to oil.

Inflation will continue to moderate, helped by a slowdown in global food prices. By 2025, inflation will be close to the 5% target set by the National Bank of Kazakhstan (NBK). The NBK is continuing its key rate-cutting programme that began in the second half of 2023. The key rate was set at 14.25% in July 2024, dropping from 16.75% in July 2023. Despite the easing of its monetary policy, the NBK remains attentive to inflationary risks, both external (rising prices in Russia and for global foodstuffs) and internal (fiscal uncertainty and ongoing price regulation reforms). Monetary policy effectiveness is also weakened by subsidised loan programmes, particularly for mortgage loans.

Current account and public balance still in deficit

The current account will remain in deficit in 2024 and 2025. The trade balance (7% of GDP in 2023) will stay in surplus. On the export side, increased oil production and shipments to Europe will contribute to the trade surplus in 2024 (representing 56% of exports in the first half of 2024), but will only partially offset the erosion of oil prices in 2025. On the import side, moderating demand for capital goods and intermediate products, as well as imported food prices, will also contribute to the trade surplus. Despite its desire to reduce its dependence on Russia, the latter remains Kazakhstan’s leading trading partner in terms of imports (11%), and third-largest partner for exports (29%) behind Italy and China. The balance of services makes a negative contribution to the current account (mainly due to tourism and transport services), as does the balance of primary income (resulting in particular from the repatriation of income from foreign investors and cross-border workers). The secondary income balance will remain negative due to remittances from workers emigrating from neighbouring countries. External debt will remain high (62% of GDP in 2023). External debt is wholly owed by the local private sector and is often related to foreign direct investment (FDI). The NBK's asset reserves amounted to 8 months of imports in July 2024, while total reserves (the NBK’s and those of the Sovereign Wealth Fund) represented 9 to 10 months of external financing requirements.

As far as the public accounts are concerned, the 2024-2026 national budget bill provides for an increase in spending, mainly on social benefits. The cost of the April 2024 floods has been estimated at 200 billion tenge, or 1% of the budget revenue initially estimated for 2024 (20.4 trillion tenge). Part of the public deficit will be financed by guaranteed transfers from the Kazakhstan National Fund (3.3% of GDP in 2023, or 2.2 trillion tenge) which is derived from oil revenues. However, the amount of these transfers will be gradually reduced over the next few years. Public debt will remain low.

Internal and external political stability

Following violent protests in January 2022 (after a sudden rise in the price of fuel), President Kassym-Jomart Tokayev (from the Amanat party like his predecessor Nazarbayev), who was re-elected after a snap election in November 2022, presented a programme of institutional reforms that included reforms to the Constitution, unheard of since 1995. One of the main thrusts of his campaign was to reduce corruption and nepotism by banning people close to the President from holding senior government posts, and prohibiting the President and members of parliament from belonging to a political party while in office. In 2023, the parliamentary elections held on 19 March under a new mixed electoral system once again resulted in victory for Amanat, the President's party, with 40 of the 69 seats available under the proportional representation system, as well as 22 of the 29 seats available under the majority system. A change of government or President seems unlikely given the authoritarian nature of the government and the limited opportunities left to the opposition despite possible demonstrations.

Kazakhstan has always sought to maintain good relations with the West, China and Russia. The Kazakh authorities have not openly condemned the invasion of Ukraine by the Russian Federation, but have stated that they respect Ukraine's territorial integrity. However, Kazakhstan wishes to reduce its dependence on Russia, particularly the role of the Russian language and the Russian media in the country, while affirming that Russia is a strategic partner. For example, Gazprom is currently developing infrastructure to transport Russian natural gas through the eastern regions of Kazakhstan to Kyrgyzstan and Uzbekistan. At the same time, Kazakhstan has drawn closer to the European Union, its leading trading partner. Several agreements have been signed, including one in November 2022 for the supply of raw materials, refined products, green hydrogen and batteries, as well as contracts for the delivery of oil to Germany via the Russian Druzhba pipeline.

Kazakhstan is also keen to develop its partnership with Asian countries such as China, Japan, Korea and, to a lesser extent, Pakistan. In particular, it is a member of the Quadrilateral Transit (Road) Traffic Agreement (QTTA), which enables it to bypass Afghanistan by using the China–Pakistan Economic Corridor (CPEC).

Last updated: September 2024