Kazakhstan Economy

Kazakhstan Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

Kazakhstan is the strongest economy in Central Asia based on the extraction and export of mineral resources, especially oil and gas. Its priority is the diversification of the economy and the development of non-mining sectors, attracting foreign investments, supporting the localization of production with a focus on the export of local products. Prospective sectors are especially agriculture, which has good conditions for development in Kazakhstan, energy, engineering, etc. Check ebizdir for economical facts of Kazakhstan.

By 2020, Kazakhstan’s GDP grew by 1-4% year-on-year. In connection with the global pandemic and economic crisis, associated with the limitation of logistics chains and the reduction of prices of raw materials on the markets, in 2020 there was a drop in the GDP of Kazakhstan by 2.6%. In 2021, there was a revival of the country’s economy with GDP growth of 4.1%, which was contributed by, among others, stabilization of oil prices on world markets and revival of consumer demand. However, the country continued to struggle with the consequences of the COVID-19 pandemic and the associated quarantine measures and travel restrictions. The slight decline in 2020 and the subsequent return to economic growth was also made possible thanks to transfers of funds from the so-called National Fund, which accumulates wealth from the extraction of mineral resources. The short-term impact on economic growth and investor expectations was caused by the events of January 2022,

Hand in hand with the country’s political and constitutional reforms are also changes in the socio-economic area with the aim of ensuring stability in the country. The KZ government currently emphasizes attracting foreign investment and improving the business environment, incl. simplification of the legal framework, decentralization, demonopolization and deoligarchization, development and modernization of energy, the mining sector, infrastructure, processing industry, agriculture, etc.

Since the transition of the local currency to a floating exchange rate in 2015, the weakening of the Tenge has been the main inflationary impulse. Since then, the Tenge has devalued by approximately 200% from 188 KZT/USD to today’s level of around 431.78 KZT/USD (May 2022). The currency is still very sensitive to fluctuations in world oil prices and also, in view of the interconnectedness of the economies, of the neighboring ruble (among other things in connection with the sanctions imposed on Russia by the USA and the EU). At present and in the medium term, inflationary pressures are also growing due to the gradual increase in the price of electricity and water, without this step the industries in question are not able to generate profits, let alone finance much-needed investments in modernization. Kazakhstan’s economy is characterized by significant overemployment, which results not only from relatively low labor costs, but also from the significant influence of the state in the economy, where the largest employer is, next to the state, semi-state enterprises. For this reason, unemployment in KZ is at relatively low levels of around 5%, sometimes at the expense of productivity.

According to the OECD risk assessment, KZ is in the fifth group out of seven. As of the end of 2021, Kazakhstan’s debt was $16billion.

Pointer 2019 2020 2021 2022* 2023*
GDP growth (%) 4.5 -2.6 4.1 2.1 3.8
GDP/population (USD/PPP) 9,812.5 9,055.8 9,827.6 10,232.2 ON
Inflation (%) 5.3 6.8 8 12.7 6.8
Unemployment (%) 4.8 4.9 4.9 5.8 5
Export of goods (billion USD) 58.1 47 60.3 67.3 67.9
Import of goods (billion USD) 39.7 38.1 41.2 46 50.3
Trade Balance (Billion USD) 18.1 10.3 20.7 23 19.6
Industrial production (% change) 1.9 1.3 -1.6 -4.8 3.7
Population (millions) 18.6 18.8 19.1 19.2 19.4
Competitiveness 34/63 42/63 35/64 ON ON
OECD export risk 5/7 5/7 5/7 5/7 ON

Source: EIU, OECD, IMD, WB

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -3.1
Public debt (% of GDP) 28.2
Current account balance (billion USD) -5.7
Taxes 2022
F.O 10%
VAT 12%

Total foreign exchange reserves of Kazakhstan, incl. assets of the National Fund amounted to USD 8billion at the end of March 2022. The assets of the KZ National Fund, which accumulates revenues from the extraction of Kazakhstan’s oil, amounted to USD 5billion at the end of March 2022 (at the same period in 2021 they amounted to USD 57.6 billion, in 2019 they were estimated at just under USD 62 billion). The significant decrease in assets in 2020 was caused by a decrease in income from oil extraction and an increase in transfers to the state budget mainly due to the fight against the coronavirus epidemic, in the following period it decreased as a result of foreign exchange interventions to stabilize the Tenge exchange rate and pay off the foreign debt. The state budget deficit for 2021 was 3.1% of GDP (4% in 2020), the surplus was last recorded in 2006.

In May 2022, President Tokayev approved a new law on the state budget for 2022. The original law was already published at the end of 2021, but as a result of the events of January, it was decided to amend it. The growth forecast for 2022 was reduced from the original 3.9% to 2.1%. Inflation is estimated at 8-10% against the previously planned 4-6%. The average price of oil was set at USD 90 per barrel, which is a significant increase compared to previous years. The dollar exchange rate is set at 460 KZT/USD. Estimated revenues to the budget will amount to 1billion KZT, expenses 18.06 billion KZT. The amount of the deficit should be 3.3% of GDP. The President also signed an amendment to the Act on Guaranteed Transfers from the National Fund for 2022. The guaranteed transfer was increased by KZT billion to KZT 4 billion.

Compared to 2020, the public debt of KZ decreased from 36.6% of GDP to 28.2% of GDP, this too was rehabilitated, among other things. from the resources of the National Fund.

Banking system

Kazakhstan has a two-tier banking system. The national (central) bank represents the first level of the system. All other banks are second tier. The basic regulatory document for banking sector activity is Law No. 2444 on “Banks and Banking Activities” from 1995. In 2014, the Government approved the Concept of Development of the Financial Sector of Kazakhstan until 2030 (No. 954).

In May 2022, a total of 22 banks were registered in Kazakhstan, 14 of which had foreign participation. The second level is represented by a number of banks operating on a commercial basis. The largest of them are Halyk bank, Fortebank, BankCentrKredit and Kaspi Bank. In connection with the current events, the activities of three banks with Russian capital were suspended. These were Sberbank, VTB bank and Alfa bank (taken over by Bank CentrKredit).

Asset growth and consolidation of Kazakhstan’s banking sector continued in 2021, which will probably continue in 2022, even as a result of sanctions against Russia, when larger players will absorb smaller ones, mergers will take place, etc. Assets of second-tier banks grew in 2021 by 18% to value of 3billion KZT. Financing was mainly ensured by increased economic activity, the implementation of the pension reform and the implementation of state support programs. In 2021, billion transactions worth 9billion were made through payment cards issued by Kazakh banks. tenge (billion transactions worth 52 billion tenge in 2020). As of January 25, 2022, the base interest rate was 10.25%.

The international rating agency Standard & Poor’s confirmed Kazakhstan’s rating at BBB- with a stable outlook.

Market supervision is carried out by the Agency for Regulation and Supervision of the Financial Market and Financial Organizations.

Tax system

It can be stated that the tax system is unclear and uncertain. In December 2017, Kazakhstan approved a new Tax Code, which de facto copies the original tax law of 2008 (закон Республики Казахстан от 10. 12. 2008 № 99-IV – ” Налоговый Кодекс РК” 2009 года ). For this reason as well, it has attracted widespread criticism, in addition to containing even more references to various provisions than the original.

According to this law, the following taxes are in force from 1 January 2020:

  • corporate income tax (income taxes) for the non-raw materials sector at a rate of 20%;
  • corporate income tax for the agricultural sector at a rate of 10%;
  • personal income tax at a rate of 10%, social insurance at a rate of 9.5% (0% in exceptional cases);
  • value added tax (VAT) at a rate of 12%;
  • compulsory social insurance fee 2%.

A non-resident, a legal entity, doing business in KZ through a permanent representative (branch, company, etc.) pays a net income tax of 15% in addition to the 20% income tax. A non-resident, a legal entity, having income from sources in KZ and not doing business through a permanent representative, pays additional taxes, e.g. tax on dividend income 15%, or business risk insurance 15%, etc.

VAT of 12% is applied to the sale of goods and services, if the place of sale is KZ, and to taxed imports. Exports, sales of precious metals between residents, income from international transfers, sales of goods in special zones and some other special cases are exempt from VAT. Companies, including foreign ones, with a turnover of up to 208,700 dollars per year (according to the current exchange rate) do not pay VAT. VAT is refunded to non-residents – legal or natural persons. The refund procedure is quite lengthy and consists of proving the right to a VAT refund, submitting an application to the tax office with documents on tax payment and checking the right to a VAT refund by the tax office. Only then is the tax refunded. In the case of solving a specific situation in the tax area, it is recommended to contact local law firms, possibly and some larger international audit firms that have a presence here.

Kazakhstan Economy