Expert Warns of Recession Risks in Kazakhstan's Economy

A financial expert has outlined a confluence of factors threatening Kazakhstan's economic growth, with a significant monthly GDP contraction already underway. The primary driver is the energy sector, where the shutdown of the Tengiz field due to issues with the Caspian Pipeline Consortium has slashed oil production by roughly 2.5 million tons per month. Compounding this, oil prices have fallen by $12–13 per barrel compared to January 2025 levels. Together, these elements are estimated to contribute to a monthly GDP decline of about 7%. A partial offset has come from soaring prices for gold, uranium, copper, and silver, which also contribute substantially to the nation's economic output.

The second major pressure point is the significant strengthening of the Kazakh tenge. This appreciation reduces exporters' revenue in tenge terms while their costs remain unchanged, thereby diminishing their contribution to GDP. A strong national currency also squeezes domestic manufacturers by making imports cheaper. While this currency strength helped contain inflation at 1% in January, it creates severe challenges for businesses.

According to the financier, extreme currency volatility—reaching up to 12% over six months—makes it impossible for entrepreneurs to plan effectively or hedge their risks. Importers are forced to incorporate worst-case exchange rates into their prices. The volatility stems from a shallow market and regulatory restrictions on foreign currency operations for legal entities. The expert noted that authorities show no intention of removing these market barriers, which prevents the formation of a normal foreign exchange market.

The budget was planned based on an exchange rate of 540 tenge per US dollar. If the rate remains around 500 tenge as forecasted, budget revenues from foreign currency earnings could shrink by approximately 8%. Furthermore, reduced transfers from the National Fund will weaken support for the currency.

The introduction of a new Tax Code presents another hurdle. The expert points to deferred demand from December ahead of its implementation, predicting a significant drop in sales for real estate and automobiles in the first quarter, with added pressure on the construction sector.

"Ensuring economic growth at last year's level will be an extremely ambitious task," stated the expert. "Last year benefited from increased oil production, anomalously high metal prices, and a surge in consumer demand ahead of the new Tax Code."

Traditionally, short-term growth is propped up by accelerated government spending. However, the financier emphasizes that attracting investment is key. The current approach relies on direct negotiations with investors, often leading to preferential terms being granted. He concluded that systemic work to improve the investment climate and remove barriers is not being pursued actively enough.