What’s in Store for Kazakhstan’s Economy in 2026?

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After six years of positive GDP growth, fueled by government interventions, Kazakhstan's economy may begin to slow down this year. The authorities plan to reduce withdrawals from the National Fund and high inflation could persist, also due to the tax reform. Experts surveyed by Vlast expect the gap between official statistics and the real welfare of citizens to widen further.

Major international financial organizations agree that Kazakhstan’s economic growth rate will begin to decline in 2026. While the country’s GDP is expected to have grown by approximately 6% in 2025, forecasts for this year are significantly more modest, ranging from 4% (S&P) to 4.5% (World Bank, IMF). Only the European Bank for Reconstruction and Development and the Eurasian Development Bank expect growth to exceed 5%.

“In the case of Kazakhstan, we must take into account that this is an emerging market with a rapidly growing economy. It is reasonable to expect some deceleration in growth,” Dmitry Dolgin, chief economist for the CIS at ING Bank, told Vlast.

Economist Rakhimbek Abdrakhmanov believes that structural imbalances will become more evident.

“GDP growth will be less and less linked to real economic activity and increasingly tied to government spending, inflation, resource rents, and perhaps some manipulation of statistics,” Abdrakhmanov told Vlast.

No Sources for Revenue Growth

The most acute problem will continue to be the decline in real incomes of citizens. According to Abdrakhmanov, the rise in prices of 28 basic goods and services (such as food, gas, and utilities) will lead to a 5-6% decline in incomes. Faced with declining purchasing power, Kazakhstanis compensate by taking out loans and spending their savings. This trend will continue in 2026.

“The potential for real income growth in 2026 is extremely limited because there are simply no sources for it,” the economist believes.

Real income growth is mainly driven by increases in private investment, productivity, employment, and wage growth in the private sector—primarily among SMEs in manufacturing industries.

“But as we saw very clearly in 2025, these industries are not developing today,” Abdrakhmanov told Vlast.

This is particularly evident in the downward trend in private fixed capital investment. State-owned companies investments and government interventions account for 50% of investments. Plus, Abdrakhmanov argues, a high interest rate is preventing this trend from reversing because of the high cost of borrowing.

Under current conditions, only salary indexation and state benefits can boost incomes, Abdrakhmanov explained. But budget constraints will prevent the authorities from doing so. The debt, currently at 10% of GDP, will continue to grow.

“Any increase in government revenue will either be inflationary or short-lived,” the economist emphasized.

Consequences of Tax Reform

Dolgin added that the financial situation of Kazakhstan’s households will inevitably be affected in the short term by the VAT rate increase and the transition to a new tax policy. This will hit both the purchasing power of citizens (inflation) and private sector investment.

“Tax increases usually have a negative impact on private investment, especially on investments by low-margin private companies. But investment in Kazakhstan is mainly driven by large industrial and export-oriented companies, for which the effect of VAT should not be significant,” he explained.

Dolgin believes that the main goal of tax reform is to bring the economy and investment environment into balance. This could strengthen investor confidence, but it is impossible to predict the outcome in advance.

“The policymakers’ bet is that the long-term benefits of having a balanced economy would boost investor confidence, in terms of investment climate, which will offset the arithmetics of this macroeconomic effect of the VAT hike. We have to see how this works out,” Dolgin said.

Abdrakhmanov noted that the situation is further complicated by the fact that the government refuses to impose higher taxes on large businesses, especially extractive companies and banks. Instead, the authorities are shifting the burden onto ordinary citizens and SMEs, which, in a situation of falling oil prices (which could float around $55/barrel in 2026), will only exacerbate the imbalances in public finances.

During a briefing following a government meeting in December, minister of economy Serik Zhumangarin stated that his department expects around 300,000 companies to close as a result of the tax reform. These will mostly be companies that were established as part of tax optimization schemes, according to him.

Photo by Zhanara Karimova.

Abdrakhmanov believes that the reform will also affect real small businesses, which will find themselves unable to operate in the new tax environment. In the worst-case scenario, the mass closure of SMEs in Kazakhstan could result in the loss of between 900,000 and 1.2 million jobs.

“The baseline scenario for 2026 is a slow, steady deterioration in living standards, not in the form of a collapse, but in the form of creeping impoverishment. Next year, we will inevitably realize that the current model of operation has exhausted itself. Fiscal stimulus no longer provides income growth, a sustainable budget, or social stability," the economist concluded.

Social Tensions and Labor Disputes

Against the backdrop of economic difficulties, the risks of social tension are increasing. This is primarily because workers still lack legal mechanisms for making demands and resolving labor disputes.

Mihra Rittmann, senior researcher for Central Asia at Human Rights Watch, said that recent amendments to the Labor Code, which have come into force in January, fail to meaningfully address any of the long-standing issues related to restrictions on freedom of association for trade unions or the right to strike. More often than not, exercising these rights exposes workers to criminal sanctions.

“The International Labor Organization has determined that criminal sanctions for those who participate in peaceful strikes represent an excessive punishment. Moreover, this is inconsistent with Kazakhstan’s human and labor rights commitments,” Rittmann told Vlast.

Rittmann finds it difficult to predict the dynamics of protest activity. However, she says that the country’s history shows that spontaneous protests by workers, including those motivated by economic conditions, occur regularly.

“If these conditions are not in place, if the authorities do not fully respect freedom of association and the right to collective bargaining, workers may feel they have no other choice but to protest or go on strike, even when doing so comes at great personal risk, including being fired, fined, or imprisoned.”

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