Kazakhstan’s economy projected to grow by
Kazakhstan’seconomy is poised to grow by 4.9% and S&P Global (NYSE:SPGI) Ratings has affirmed its ’BBB-’ long-term and ’A-3’ short-term sovereign credit ratings on Kazakhstan on February 21, 2025, maintaining a stable outlook, reported Investing.com. The ratings agency projects that the nation’s economy will expand by 4.9% this year and 3.4% in 2026, bolstered by increased oil production and government spending. The ’BBB-’ long-term rating’s stable outlook is based on the expectation that the risks of prolonged fiscal weakness and higher government interest costs will be offset by planned governance and economic reforms, along with Kazakhstan’s strong asset buffers.
According to Investing.com, despite ongoing fiscal pressures and a rise in domestic debt, Kazakhstan’s robust fiscal and external balance sheets provide ample buffers against potential external shocks. The country’s high spending needs, weak revenue collection, and geopolitical uncertainty are expected to impact its fiscal performance. However, new fiscal rules are aimed at reducing reliance on the National Fund of the Republic of Kazakhstan (NFRK), and the government plans to implement additional limits on the fiscal usage of NFRK funds from 2026.
Kazakhstan’s economy, which relies heavily on the oil sector, exposes it to volatile oil prices, despite ongoing diversification efforts. The hydrocarbon sector accounts for nearly 20% of Kazakhstan’s GDP, over 30% of general government revenue, and more than half of exports. The country’s strong fiscal and external balance sheets, built primarily from budgetary surpluses during the period of high commodity prices that ended in late 2014, provide a buffer.
The country’s economic and governance structures are expected to change only modestly under President Kassym-Jomart Tokayev. The economy remained resilient in 2024, largely due to higher government spending. Government stimulus measures, including higher spending on infrastructure, wages, defense, social security, and education, have been ongoing since 2019.
Investing.com further notes that near-term growth is expected to be boosted by rising oil production. Medium-term growth prospects will likely moderate after 2025 as government spending growth slows. The government’s policy aims to diversify the economy through the National Infrastructure Plan, with projects in the utilities, transport, water supply, and waste-water sectors.
Despite efforts to diversify export routes, Kazakhstan’s reliance on the Caspian Pipeline Consortium (CPC) pipeline is unlikely to decrease. Geopolitical tensions during the ongoing Russia-Ukraine war could disrupt Kazakhstan’s oil exports and weaken external and fiscal metrics.
The government’s strong asset buffers remain a strength despite persistent fiscal deficits. The government is expected to maintain high spending levels and expanding the revenue base will take time. Lower oil prices are likely to lead to higher current account deficits averaging 3.4% of GDP over 2025-2028, relative to 1.8% estimated in 2024.
Kazakhstan’s net external creditor position remains strong, given its moderate amount of external debt and relatively large foreign assets. Gross foreign exchange reserves increased sharply to approximately $45.8 billion on December 31, 2024, from close to $36 billion at year-end 2023.
The banking sector in Kazakhstan has shown relative resilience to geopolitical and macroeconomic challenges, with banks accumulating adequate capital buffers, solid liquidity positions, and a high share of core customer deposits in their funding profiles.
