Regional Success Story
- Kazakhstan has long stood as a breakthrough nation within Central Asia: with vast oil reserves, a driven population and a strategic trade position, they have been the most prominent emerging market in the region.
- However, some are questioning the longevity of their growth: with rising borrowing costs, a ballooning budget, and a dependence on oil as an export, it has recently come under scrutiny from investors. So, does Kazakhstan still retain some charm?
Hidden in Plain Sight
- Since 2000, the Kazakh economy has grown on average at over 8% per annum in real terms (Government of Kazakhstan, 2024). It also has the ninth largest territory globally and a population of just over 20 million, which has resulted in one of the lowest population densities at 7.4 people per square kilometre (World Bank, 2024).
- Recently, S&P has affirmed Kazakhstan’s credit rating outlook to positive, remaining currently at BBB-, which is the highest rating in the region (S&P, 2025).
- However, investment has been declining, and productivity remains persistently low whilst the government has been relying further on the National Oil Fund to sponsor its expansionary fiscal policy (World Bank, 2025). These developments, alongside lower oil prices, have resulted in a growing non-oil fiscal deficit projections of 8% (IMF, 2025).
What changed?
- With the onset of the war in Ukraine, Kazakh oil exports to Russia have been under pressure to limit exports (Economist Intelligence Unit, 2024). In the meantime, the recent threats from the Trump administration towards the larger importers of Russian oil in the region, India and China may turn to an alternative source of Kazakh oil.
- This presents both an opportunity or a curse in disguise: the government has for a long time been trying to diversify away from oil exports, and to reduce the import-dependency of the nation.
- In the meantime, crude oil remained at over 52% of Kazakhstan’s exports in 2024 (Bureau of National Statistics, 2024). However, this must be contextualised: although crude remains a dominant export, in January 2024 the country for the first time began to export more than it imported (Bureau of National Statistics, 2024), demonstrating that the government’s efforts have begun to bear fruit.
- Beyond primary commodities, it is worth noting the development of an industrial sector is accelerating a seismic shift: chemical products, metals, and metal-related good are emerging as industries to watch (Eurasian Development Bank, 2024).
Key Risks
- Dependence on primary commodities as exports remains a significant challenge to overcome, one that few economies which historically relied on primary production have escaped.
- Investors should keep in mind the perception of corruption in the country: although there has been a noticeable improvement in its ratings, the country remains ranked 88th out of 180 countries examined (Transparency International, 2024). This creates a potential premium on investments which investors should keep in mind.
The Cordoba View: Cautiously Optimistic
- Growth projections have softened as fiscal expansion and oil dependence weigh, yet Kazakhstan’s sovereign balance sheet and rating stability (BBB-) still set it apart regionally.
- Disruptions to Russian flows and shifting Asian demand could re-anchor Kazakhstan as a key energy supplier, though this risks delaying diversification.
- Investment outlook: despite lower growth projections, Kazakhstan retains relative appeal in Central Asia: investable for those willing to price in volatility and adopt a selective, long-term horizon.
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