A Refresher on Kazakhstan’s Macroeconomic Outlook

Growth has moved past its peak

• Real GDP grew 6.5% in 2025, the strongest pace in over a decade and the first year with nominal output above $300bn, supported by robust domestic demand and rapid household borrowing.
• Momentum has cooled sharply, with Q1 2026 growth slowing to 3.0% year-on-year from 5.6% a year earlier, the deceleration concentrated in mining and hydrocarbons following a temporary halt at the Tengiz oilfield and disruptions to the CPC pipeline.
• Industry has contracted for the first time since 2020, while services growth has been squeezed by a VAT hike from 12% to 16% and record-high policy rates, which together added cost pressures and dampened demand.

Banking strength, with asset quality in focus

• The sector remains dominated by Halyk Bank, which controls 30% of total assets and accounts for half of all financing to the economy, affirmed at BBB- (Stable) by both Fitch and S&P on strong capitalisation (CAR of 21%) and ROE above 30% since 2022.
• Asset quality offers a more paradoxical picture, with Stage 3 loans rising from 6.3% to 8.2% in Q1 2026. Halyk attributes this to the moratorium on selling problem retail loans to collection agencies; with that moratorium lifted in May 2026, Q2 results due in August will be the genuine test of whether the rise is an accounting artefact or deeper deterioration in household credit.

Fiscal policy pulling against disinflation

• Fiscal policy remains expansionary, with an elevated deficit in 2025-26 and a deteriorating debt trajectory. The Finance Minister has acknowledged plans to borrow an additional KZT 24tn over three years, which would double national debt to KZT 57tn by 2028, against the official framework’s own target of debt falling to 19.6% of GDP.
• Much of this is being channelled through Baiterek, which plans to inject KZT 8tn (4.4% of GDP) into the economy in 2026 via SME, housing, and agricultural lending.
• IMF modelling finds the fiscal stance added around 7 percentage points to headline inflation in 2024, nearly offsetting the 6 points subtracted by monetary tightening.

Monetary policy

• The NBK held its base rate at 18%, among the highest in the CIS+, from October 2025 through May 2026, even as headline inflation eased from a 12.9% peak to 10.4%.
• On 5 June 2026 the Bank delivered a surprise 100bp cut to 17%, earlier than most analysts expected, but stopped short of committing to a rapid easing cycle.
• The NBK’s own guidance flags Baiterek’s KZT 8tn quasi-fiscal injection as a key risk that may intensify inflationary pressures and partially offset the forthcoming fiscal consolidation, a clear example of monetary and fiscal policy working against each other.

The outlook remains favourable but contingent

• Growth forecasts for 2026 diverge meaningfully, with the government predicting 5.4% and the NBK giving a more conservative 3.5-4.5%, converging toward 3.5% potential over the medium term.
• The trajectory is favourable but oil- and policy-dependent, with external risk centred on oil prices and the concentration of export routes.

Some risks to consider

• The growth outlook remains heavily exposed to global conflict, with the Iran-Israel-US war and repeated Ukrainian drone strikes on the CPC pipeline showing how quickly oil-export revenue can be disrupted.
• Continued fiscal stimulus could derail the disinflation path, forcing the NBK to pause or even reverse its recent cut.
• On the banking side, the August Q2 results will reveal whether rising Stage 3 loans reflect a genuine deterioration in household credit quality.

The Cordoba View

• Following the surprise cut to 17%, Kazakhstan’s policy rate sits 6.6pp above headline inflation. On its own this looks like attractive carry, but it isn’t yet safe to hold.
• Growth has already slowed sharply (6.5% in 2025 to 3.0% in Q1 2026), and the government’s response is explicitly designed to offset the contraction the NBK’s own rate is causing, a tension the NBK itself flags and IMF modelling confirms.
• Tenge exposure for carry therefore looks favourable, but we stay cautious on duration until monetary and fiscal policy are pulling in the same direction.