The World Bank has released a new economic update on Kazakhstan titled "Funding the Future: Boosting Revenues for Lasting Investments." The report offers a mixed forecast for the nation's economy, predicting growth to accelerate from 4 percent in 2024 to between 4.5 and 5 percent in 2025. This growth is attributed to increased oil production and continued fiscal support. However, the report anticipates that growth will slow after 2025 due to low productivity and declining investments.
Inflation in Kazakhstan is reportedly decreasing but remains above target levels. It is expected to fall to between 7.5 and 8 percent by 2025, with a further decrease to 6 percent anticipated by 2026. Despite this trend, ongoing fiscal expansion and increased currency volatility may continue to exert inflationary pressures.
"Kazakhstan’s fiscal policy continues to be expansionary with an elevated budget deficit in 2025-2026," said Andrei Mikhnev, World Bank Country Manager for Kazakhstan. He noted that while public debt is manageable, the country's growing reliance on domestic borrowing and withdrawals from the National Oil Fund of Republic of Kazakhstan raises sustainability concerns. Mikhnev emphasized the need for fiscal discipline and diversification of revenue sources.
The report identifies several key risks facing Kazakhstan's economy, including declining global oil demand, prolonged fiscal expansion, and extreme weather events impacting infrastructure and business activities.
Kazakhstan's tax revenues are significantly lower than those of its peers, limiting funding for essential public services and long-term growth opportunities according to the study. The report includes a section dedicated to revenue mobilization reforms which outlines a comprehensive tax reform agenda aimed at addressing these 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.
Addressing Kazakhstan's current infrastructure gap requires increased investment in infrastructure deemed essential for boosting productivity and ensuring resilient public services. Therefore, increasing revenues is critical for securing necessary funding for long-term sustainability.