Kazakhstan

Growth driven by hydrocarbons and domestic demand

Temporary acceleration in growth is expected in 2025 that will be driven by increased oil production and fiscal stimulus. The oil sector is central to the economy (35% of GDP and 75% of exports), with production boosted by the expansion of the Tengiz field and the start of shale oil production. Domestic demand is durably buoyant, driven by household dissaving, gradual poverty reduction and easier access to credit through subsidised loans and other quasi-fiscal operations (loan guarantees, sectoral or social support, etc.). At the same time, the modernisation of public infrastructure is supporting investment. The country also continues to attract foreign direct investment; several major projects in infrastructure, energy and metallurgy totalling EUR 6 billion were rolled out in 2025. However, growth is expected to slow from 2026 and is forecast to return to its potential as it is hampered by persistent structural weaknesses outside the hydrocarbon sector. This is due to the reduction in fiscal support measures, the stabilisation of hydrocarbon production and monetary tightening to contain inflation.

Kazakhstan’s economy continues to diversify, with services already accounting for 56% of GDP, driven by finance, trade and transport, although productivity remains a constraint. Transport and logistics are expanding rapidly thanks to demand from the extractive and agricultural sectors, as well as the development of the Trans-Caspian (or Median) Corridor and integration into China's Belt and Road Initiative. Freight volumes on the median corridor jumped 60% in 2024, supported by massive investments in rail and port infrastructure, as well as international funding to modernise roads and improve regional connectivity. In addition, construction grew by 15.4% in volume, driven by major projects in the Mangystau region (venue for events in 2023), such as schools, hospitals, desalination plants and oil pipelines. Industry remains robust (39% of GDP) but dependent on hydrocarbons, while agriculture (4% of GDP) continues to play a strategic role: with 215 million hectares of agricultural land and 12.7% of its working population employed in agriculture, Kazakhstan is one of the world's leading wheat exporters, but its potential remains under-exploited. Clean energy is beginning to emerge. The country has 148 renewable energy facilities generating nearly 3,000 MW, but this still accounted for only 5% of the energy mix in 2024. Kazakhstan has committed to achieving carbon neutrality by 2060, with flagship projects such as Hyrasia One for green hydrogen and incentives to attract private and foreign investment.

Although projected to decline, inflation remains one of the main macroeconomic challenges, with levels consistently above the 5% target for the past five years. This persistence is due to sustained domestic demand, fuelled by credit, often subsidised, and other fiscal stimuli. Added to this are external factors, notably the transmission of Russian inflationary pressures via imports, amplified by the depreciation of the tenge in the wake of the rouble and falling oil prices. The weakness of the national currency is prompting the central bank to intervene in the foreign exchange market by selling foreign currency from its reserves and the National Fund (NFRK), while maintaining a restrictive policy. In this way, it neutralises the tenge used to purchase locally produced gold by selling the foreign currency obtained from the export of this gold. Inflation expectations remain high and volatile. They are fuelled by rising fuel prices linked to the phasing out of subsidies, the planned increase in VAT from 12% to 16% in 2026 and the implementation of the Tariff in Exchange for Investment’ programme. This programme proposes tariff increases in exchange for operators' commitments to invest in modernising energy infrastructure. Despite monetary tightening, inflation is expected to remain above the central bank's target at least until 2027.

Deficit limited by the use of unconventional financing

Despite sustained economic growth, the budgetary situation is becoming more fragile due to the fall in oil prices, which has led to a drop in hydrocarbon revenues (3.2% of GDP in H1 2025 compared with 5.6% a year earlier). Tax revenues remain insufficient due to a narrow base, numerous exemptions and overly optimistic forecasts, exacerbated by the fall in oil prices. The reform of the tax code, which is scheduled for 2026 and includes tax increases and improvements in tax administration, should lead to a slight increase in revenues and support fiscal consolidation. To limit the deficit, the government is resorting to extraordinary financing, such as withdrawals from the sovereign wealth fund (NFRK) and non-conventional dividends from public enterprises. This strategy is not sustainable in the long term, as it results in a decline in the value of state assets and delays the structural reforms needed to broaden the tax base. Public debt, which is still low by emerging market standards, is nevertheless rising, with an increase in servicing costs (2.7% of GDP in 2025).

The current account deficit widened significantly in 2025. This deterioration was mainly due to lower oil prices and export volumes. While exports declined, imports increased, driven by strong domestic demand and infrastructure projects. The primary income deficit remains high due to the repatriation of profits by foreign companies in the oil sector, although the pace of repatriation is slowing as oil prices fall. The current account deficit is not financed by FDI, which has fallen sharply, particularly with the end of major oil and gas projects (dividends repatriated by the oil majors). Foreign exchange reserves are being drawn down. Due to the particularly high amount of errors and omissions, it is likely that the current account deficit is overestimated because re-exports to Russia in violation of Western sanctions are not taken into account. As part of its export diversification strategy, in June 2025 the government supported the establishment of 557 non-extractive sector companies in foreign markets. While Kazakhstan exports mainly to Italy, China, the Netherlands and Russia, it is seeking to strengthen its trade relations with the European Union as a whole, particularly in the fields of energy, infrastructure and metal ore. Russia, still a strategic partner, is seeing its position weakened in the context of international sanctions and logistical reorientation towards the Trans-Caspian corridor.

Growing influence in the corridors connecting China and Europe

Domestic policy continues to be marked by the activist dynamic of President Kassym-Jomart Tokayev, who has sought to consolidate his authority while shaping the image of a New Kazakhstan. Since the bloody riots of January 2022 which were triggered by soaring fuel prices and amplified by anger over corruption, inequality and the lack of reforms, Tokayev has marginalised the networks of former President Nursultan Nazarbayev, thereby weakening the influence of his loyalists in economic and political spheres. This strategy aims to dissociate his power from accusations of oil wealth grabbing, which he attributes to the former regime, while preventing any coordinated challenge from within the elite. Despite the announcement of institutional, social and economic reforms, the regime remains authoritarian in nature. Control over civil society, the media and the opposition remains strict, and political pluralism is virtually non-existent. The abolition of the death penalty and the creation of a Constitutional Council have not been enough to strengthen the rule of law: judicial institutions remain largely dependent and compromise access to fair justice for citizens and foreign investors alike. Popular discontent persists, fuelled by perceived corruption, nepotism, poor quality of life and strikes, particularly in the energy sector. The government's authoritarian response to dissent contributes to an uncertain political and economic climate, which is likely to deter investors and undermine long-term stability.

The temporary closure of the border between Belarus and Poland in September 2025, following the Russian-Belarusian Zapad-2025 military manoeuvres disrupted the China-Europe rail corridor, prompting Kazakhstan to accelerate the development of alternative routes, notably the Trans-Caspian corridor via Azerbaijan, Georgia and Turkey. This corridor is strategic in the context of sanctions against Russia, while Kazakhstan is regularly accused of facilitating the circumvention of Western restrictions by re-exporting sensitive goods (semiconductors, electrical components) to Russia despite the implementation of a traceability system in 2023, the effectiveness of which is limited. The situation exposes Kazakhstan to Western pressure and the risk of secondary sanctions, which is adding to the urgency of diversifying its trade routes and partners. The country enjoys international support for the project: the European Union has earmarked investments of EUR 10 billion to develop it, while the United Arab Emirates has committed USD 5 billion to ports, logistics and digital infrastructure. On the energy front, the country has tense relations with OPEC+. It regularly exceeds its production quotas (1.88 million barrels/day in June 2025 against a quota of 1.5 million), citing the difficulty of imposing cuts on foreign consortiums that operate its main fields (Tengiz, Kashagan, Karachaganak). The Kazakhstan First stance is fuelling friction with influential members. OPEC+ has even considered voluntary production increases to penalise non-compliant countries, which exacerbates price volatility and internal tensions.

Last updated: October 2025