- Growth in Kazakhstan remains strong, and banks are well capitalized and liquid overall. Elevated inflation and low global oil prices pose risks to the outlook.
- Fiscal and external deficits are projected to widen with lower oil prices. Planned tax reforms in 2026 alongside improved budget planning and enforcement of fiscal rules are needed to support fiscal consolidation.
- Monetary policy should remain tight until inflation is close to its target, while corrective measures are needed to limit fiscal deficits, help contain inflation, and support medium-term efforts to build the assets of the National Fund for the Republic of Kazakhstan.
Astana: An International Monetary Fund (IMF) staff team led by Ali Al-Eyd visited Kazakhstan during May 15-23, 2025, to discuss recent economic and financial developments, the outlook, and the country's policy and reform priorities. At the conclusion of the mission, Mr. Al-Eyd issued the following statement:
"Real GDP growth accelerated to 6 percent in the first four months of 2025 from 4.8 percent at end-2024. Growth is being driven by strong activity in the services, transport, construction, manufacturing, and extractive sectors. Domestic demand is supported by strong consumer credit growth and a loose fiscal stance, while the contribution of public infrastructure investment has increased. For 2025, the IMF projects growth to moderate to about 5 percent, reflecting slower trading partner growth and spillovers from lower global oil prices to non-oil activity, and non-oil GDP growth at about 3½ percent in the medium term, in line with its current estimated non-inflationary sustainable growth.
"Monetary policy continues to be restrictive and should remain so until inflation is close to its 5 percent target. Inflation accelerated to 10.7 percent in April 2025, reflecting broad-based price pressures from both domestic and external factors, including exchange rate pass-through from the depreciation of the tenge in 2024Q4. For 2025, the IMF projects inflation at about 10½ percent, reflecting continued domestic price pressures. Plans to reduce excess banking system liquidity with higher reserve requirements may help ease inflation pressures over the medium term.
"Fiscal and external deficits are expected to widen in the context of lower oil prices. The 2025 fiscal stance is projected by the IMF to remain expansionary, widening the non-oil fiscal deficit from 7.9 to just over 8.0 percent of GDP. In 2026, the government's plans to increase VAT rates, broaden the tax base, and adopt digitalization to improve revenue collection are welcome. Efforts to reduce widespread exemptions would further widen the tax base. The current account deficit is expected to widen to around 3½ percent of GDP in 2025 from 1.3 percent in 2024, mainly driven by lower oil prices and sustained import demand associated with public and household spending.
"Banks are healthy and financial stability risks remain contained, but vulnerabilities need to be monitored. Banks remain well capitalized, liquid, and profitable overall. Although total credit growth decelerated to about 20 percent (yoy) in March 2025, consumer credit remains elevated at around 31 percent (yoy). Distressed assets related to consumer loans have increased, remaining contained as a share of total assets. Plans to tighten macroprudential policies are welcome and should help mitigate financial stability risks from rapid consumer lending growth.
"Risks to the outlook are tilted to the downside, but large financial buffers help mitigate these risks. External risks reflect heightened uncertainties related to global trade tensions, including lower oil prices, tighter financial conditions, and slower growth in key trading partners. Domestic risks include weaker growth from delays in large infrastructure projects and increased inflation pressures. An acceleration of structural reforms and private sector development pose upside risks for medium-term growth.
"Decisive implementation of structural reforms is needed to support more diversified and resilient medium-term growth. Kazakhstan continues to invest in infrastructure projects, digitalization, AI, agriculture, and logistics. Additional structural reforms are needed to increase non-inflationary sustainable growth, including reforms to further reduce the state's footprint in the economy, strengthen public governance, improve labor and product market regulations, and boost economic and trade diversification.
"The IMF team is grateful to the authorities and other counterparts for their cooperation and hospitality."
