ASTANA, January 30, 2025 -The World Bank's latest economic update on Kazakhstan, "Funding the Future: Boosting Revenues for Lasting Investments," released today, presents a mixed outlook for the country's economy, with a projected acceleration of growth from 4 percent in 2024 to 4.5-5 percent in 2025, driven by increased oil production and continued fiscal support. According to the report, growth is expected to decelerate after 2025, reflecting low productivity and declining investments.
The report also says that inflation is gradually decreasing but remains above the target and is expected to fall to 7.5-8 percent by 2025, and to 6 percent in 2026. Nonetheless, continued fiscal expansion and increased currency volatility may sustain inflationary pressures.
"Kazakhstan's fiscal policy continues to be expansionary with an elevated budget deficit in 2025-2026. While public debt remains manageable, the increasing reliance on domestic borrowing and withdrawals from the National Oil Fund of Republic of Kazakhstan to cover fiscal shortfalls, raises sustainability concerns. In this report we emphasize the importance of fiscal discipline and the diversification of revenue sources to address these issues," says Andrei Mikhnev, World Bank Country Manager for Kazakhstan.
The report identifies key downside risks, including declining global oil demand; prolonged fiscal expansion; and the impacts of extreme weather events on critical infrastructure and business activity.
According to the study, Kazakhstan's tax revenues lag significantly behind its peers, limiting the funding of essential public services and long-term growth opportunities. The special topic section of the report discusses revenue mobilization reforms. The report outlines a comprehensive tax reform agenda to address fiscal challenges. Proposed reforms include transitioning to a progressive income tax system, phasing out inefficient tax incentives, VAT reforms , aligning excise taxes with environmental goals, and enhancing tax administration.
Kazakhstan's current infrastructure gap demands increased infrastructure investment essential to drive productivity and ensure uninterrupted and resilient public services. Therefore, it is critical to ramp up revenues to ensure essential funding for long-term sustainability.
