Kazakhstan is the largest economy in Central Asia, with growth primarily driven by the extraction and export of a narrow range of commodities that the country has in abundance. While the country’s extractive sectors will continue to be important for the economy, the government has a long-standing commitment to economic diversification, with a mature, wide-ranging set of policies in place to achieve this. The commitment to diversification reflects the awareness that extractives-driven growth has created resilience challenges in the short-term due to the immediate impact of external demand shocks on domestic output, and that in a context of the net-zero transition, it cannot provide inclusive, sustainable growth in the long-term.
The country has emerged on a relatively strong footing from both the COVID-19 crisis and Russia’s war in Ukraine. Real GDP grew by 2.5% in 2022, down from 4.5% the previous year, with the slowdown largely attributable to temporary disruptions to oil production. Kazakhstan’s economic resilience in face of these shocks is testament to the sizeable buffers and prudent policy measures of the Kazakh authorities. Nevertheless, the growth outlook remains uncertain, with social unrest in January 2022, the continuation of Russia’s war in Ukraine and the potential for further sanctions on Russia to affect Kazakhstan’s trade, accelerating domestic inflation and tighter global financial conditions all contributing to a challenging short-to-medium term context.
While the country’s resilience to recent shocks is positive, it is important that policymakers remain committed to implementing longer-term reforms to support private-sector development and greater diversification. Addressing the issues that prevent private firms from investing, hiring, innovating and growing will be key to improving the resilience of Kazakhstan in a global context that is rapidly becoming more digital and less carbon intensive.
Using insights derived from a private sector survey of foreign firms in Kazakhstan, this report examines three key issues in the business climate that may stymie the contribution and growth of the private sector in the country. Bringing together recent and new analysis of key policy areas for a vibrant business climate in the country, the report will be of use to local policymakers, international development partners, and other stakeholders interested in developing a diversified and resilient private sector in Kazakhstan.