Kazakhstan macro: navigating a series of external shocks
Recently published economic statistics indicate that despite a number of external shocks that had affected the nation’s ability to export oil, Kazakhstan’s economy is still performing fairly well, although perhaps falling a bit short of expectations. According to the Bureau of National Statistics, GDP was up 4.1% y-o-y in 1H26, and the short-term indicator — a monthly measure of activity across six key sectors — rose by 4.9% in 7M26. The slower growth earlier in the year was largely due to oil export disruptions in the first quarter. In recent months Kazakhstan faced some new disruptions, and as a result, value added in the mining segment was down by 4.0% y-o-y in 1H26. However, other segments of the economy delivered strong growth, with manufacturing up by 9.8%, construction growing by 15.2%, and agriculture delivering 4.4% y-o-y growth over the same period. Overall, goods production increased in 1H26 y-o-y by 5.1%, and services grew by 3.6%, of which the trade segment expanded by 5.7% while transportation and storage was up by 7.1%.
Budget execution statistics also indirectly show that economic growth has slowed but remains strong enough. However, it seems unlikely the government can boost the economy by increasing budget spending as it has done in recent years, as the government plans to boost VAT collection appear to have been overly optimistic. Financial data show that total revenues of the consolidated budget reached 51.0% of the annual plan in 7M26, with tax revenues making up 50.4% of that. By this period, authorities had already collected 93.4% of non-tax revenues, which usually indicates that tax revenues were slightly behind the plan for this period. Indeed, VAT paid by the local tax payers accounted for about 35.2% of its annual target, which was set too high in our view.
Despite the positive effect of the tax reform, the Kazakh economy is still quite vulnerable to external shocks, as disruptions in oil exports have hit not just growth rates but also budget revenues. An overly strong tenge remains another challenge for the national budget. Still, growth is solid enough so that extra fiscal stimulus doesn’t seem necessary. Without further spending beyond the revised local budget figures, inflationary pressures could keep easing, raising the chances of a lower base rate later this year. Meanwhile, the government will likely stick to its usual methods of boosting "non-tax revenues" such as dividends and other transfers from state-owned companies.
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