Expert Warns of Recession Risk in Kazakhstan Due to Oil Shock and Currency Volatility

A financial expert has issued a stark warning about the growing risk of recession in Kazakhstan, citing a perfect storm of negative factors. The primary threat stems from a significant drop in oil production, triggered by the shutdown of the Tengiz field due to issues with the Caspian Pipeline Consortium (CPC). This has led to a monthly decline in oil output of approximately 2.5 million tons.

Compounding this problem is a concurrent fall in global oil prices, which are now $12–13 per barrel lower than in January 2025. According to the analyst, these two factors combined are responsible for roughly a 7% monthly contraction in GDP. A partial offset has come from soaring prices for other key exports like gold, uranium, copper, and silver.

The second major headwind is the substantial strengthening of the national currency, the tenge. A stronger tenge reduces exporters' revenue when converted from foreign currencies while their costs remain stable, thereby diminishing their contribution to economic growth. It also puts pressure on domestic manufacturers by making imports cheaper, though this effect helped keep inflation at just 1% in January.

However, extreme currency volatility—reaching up to 12% over six months—poses a severe challenge for businesses. The expert attributes this volatility to a shallow foreign exchange market and regulatory restrictions on currency operations for legal entities. With the state budget based on an exchange rate of 540 tenge per dollar, a stronger rate of 500 tenge could slash budget revenues from foreign currency earnings by about 8%. Reduced transfers from the National Fund will further weaken support for the currency.

"This makes it impossible for entrepreneurs to plan normally and hedge their risks," stated the financier. "The exchange rate is highly volatile, and importers build maximum values into their prices. Unfortunately, there are no plans to remove the current regulatory barriers in the currency market, which prevents the formation of a normal forex market."

The introduction of a new Tax Code adds another layer of complexity. The expert notes that December saw a surge in deferred demand ahead of its implementation, which is now expected to lead to a significant drop in sales of real estate and automobiles in the first quarter. The construction sector will also face pressure.

"Ensuring economic growth at last year's level will be an extremely ambitious task," he concluded. "Last year's growth was heavily supported by increased oil production, anomalously high metal prices, and boosted consumer demand ahead of the new Tax Code."

While short-term state spending could provide some support, attracting investment is deemed crucial for sustainable growth. The current approach relies heavily on direct negotiations with investors who often receive preferential terms. The expert criticized this model as insufficiently systematic and called for more active work to improve the overall investment climate and remove barriers.