Kazakhstan macro: recent economic and financial data suggest a coming slowdown in growth
Our previous report highlighted that despite strong economic growth, several paradoxes have surfaced in the Kazakh economy, suggesting a potential slowdown amid inevitable economic policy changes. One such shift involves an evolving fiscal policy and a seemingly more cautious use of public funds. Tax reforms, including a higher VAT, aim to reduce the budget's reliance on oil revenues and exchange rate fluctuations. Authorities appear to have recognized that significant mid-year increases in expenditures, well above initial budgets, have been a key driver of inflation.
In 9M25, local budget expenditure reached KZT11.32 trillion, while the revised annual target is KZT17.04 trillion, meaning the government needs to spend KZT5.72 trillion in 4Q25—about half of the total spent in the first nine months. Although the republican budget expenditures remained unchanged this year, spending was sluggish and uneven, with around KZT0.8 trillion in expenditures delayed during 9M25. For 2025, the republican budget must spend KZT25.2 trillion, but only KZT17.6 trillion was financed in 9M25, leaving KZT8.6 trillion for 4Q25—nearly half of the 9M25 expenditures. It seems another year-end spending spree is on the horizon. Inflation is expected to remain high, continuing to erode real household incomes and wages.
We believe Kazakhstan can maintain a solid growth pace in the medium term, although not as fast as this year, thanks to its ongoing economic transformation. The economy is diversifying, reducing dependence on the oil sector and leveraging its strategic location to strengthen its role as a transit hub at the crossroads of East-West and North-South trade routes. However, the recent policy of overstimulating the economy has proven less effective.
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