Inflation - The Times Of Central Asia

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Inflation

Inflation in Kazakhstan “Eating Away” at Incomes: Authorities Struggle for Answers

Inflation in Kazakhstan is continuing to erode household incomes, driven by the country’s dependence on imports, rising utility tariffs, and increasing tax burdens. While living costs soar, wages remain sluggish, forcing many families to allocate most of their earnings to essentials such as food, medicine, and utilities. Rising Prices, Stagnant Wages As of August, annual inflation had reached 12.2%, and experts warn it could climb even higher by year’s end. The National Bank’s original 2025 inflation target of 5% has proven to be overly optimistic. “This is a negative, sad trend. It shows that not enough measures have been taken. That it was necessary to tighten monetary policy earlier. It was necessary to contain inflation risks,” said Ramazan Dosov, chief analyst at the Association of Financiers of Kazakhstan. The National Bank’s base rate, its primary instrument for controlling inflation, currently stands at 16.5%. Financier Rasul Rysmambetov notes that the rate is unlikely to be lowered in the near future. However, high interest rates also reduce access to loans for businesses, curbing investment. Despite frequent government statements about inflation-control measures, experts argue that artificial price regulation offers only temporary relief. In his September 8 address to the nation, President Kassym-Jomart Tokayev acknowledged the severity of the issue, stating, “Today, the main problem is high inflation, which is eating away at economic indicators and household incomes. There is no ready-made solution to this problem.” Tokayev called for coordinated efforts across government agencies. At the beginning of 2025, Kazakhstan’s average monthly salary was reported at 424,200 KZT (about $800), reflecting a 24% increase over the previous year. However, this figure obscures wide regional disparities. In many areas, typical monthly salaries range between 180,000 and 230,000 KZT ($330-430). Per capita income reached 194,000 KZT ($362), up 17% from early 2023, but not enough to keep pace with inflation. According to kazkredit.kz, average families now spend up to 95% of their income on day-to-day expenses. In 2023, 52% of income went toward food; that figure has risen to more than 54% in 2025. Halyk Finance, cited by inbusiness.kz, reports that more than half of Kazakhstan’s workers earn below the national average. Salary data reveals stark income inequalities across sectors, with higher wages in mining, finance, and telecommunications, and significantly lower wages in agriculture, healthcare, and public administration. Analyst Arslan Aronov notes that although nominal wages increased by 11.3% in the second quarter of 2025 compared to the same period in 2024, real wage growth was effectively zero due to inflation. Public sentiment reflects the strain. Economists at KZTnomika reported a slight easing of inflation expectations in August 2025, but overall confidence in price stability remains low. Eighty-two percent of survey respondents reported rising food costs, with meat and dairy products leading the list. Among non-food items, medicines, clothing, and cleaning products were most frequently cited. For paid services, rising costs for housing, internet, mobile communication, and healthcare were prominent concerns. Background and Analysis Kazakhstan’s struggle with inflation is rooted in both external shocks and structural...

Growth Forecasts

ADB Raises Kazakhstan’s Economic Growth Forecast, Warns of Higher Inflation

The Asian Development Bank (ADB) has revised upward its economic growth forecast for Kazakhstan for both 2025 and 2026, while also raising its inflation projections. The updated outlook was published in the July edition of the Asian Development Outlook. Growth Outlook Strengthened According to the ADB’s latest report, Kazakhstan’s GDP is now expected to grow by 5.1% in 2025, up from the 4.9% forecast issued in April. The projection for 2026 has also been increased from 4.1% to 4.3%. Key growth sectors include: Transport: +21% Construction: +16.9% Manufacturing: +8.7% Mining: +6.1% Particular emphasis is placed on the early expansion of oil production at the Tengiz field, which launched ahead of schedule. This, combined with Kazakhstan’s increasing oil exports within the framework of OPEC+ quotas, has bolstered the growth outlook. As previously reported by The Times of Central Asia, in June, Kazakhstan raised production for the third consecutive month, contributing positively to GDP growth. "Growth in tax revenues has allowed for increased government investment in capital projects and the social sector," the ADB commented. "The early launch of the Tengiz expansion has strengthened prospects for the extractive industry. OPEC+'s May 31 decision to continue raising production supports this trend, as Kazakhstan is utilizing its full capacity." Inflation Pressures Intensify Despite the improved growth outlook, the ADB now expects inflation to reach 10.2% by the end of 2025, up from the 8.2% forecast in April. For 2026, inflation is projected at 8.4% (previously 6.5%). Data from Kazakhstan’s National Statistics Bureau indicates that annual inflation reached 11.3% in May and 11.8% in June. Paid services remain the primary inflation driver, though monthly price increases slowed modestly from 0.9% in May to 0.8% in June. The ADB notes rising inflationary pressure across the broader Caucasus and Central Asia subregion. The regional average is now expected to hit 7.8% in 2025 and 6.7% in 2026 both higher than the previous forecasts of 6.9% and 5.9%, respectively. Supporting Forecasts The Eurasian Development Bank (EDB) also anticipates robust economic expansion in Kazakhstan, projecting GDP growth of 5.5% in 2025, up from 4.8% in 2024, with sustained momentum through 2026-2027. However, the EDB likewise foresees persistent inflation, expecting it to reach 11.9% by year-end. Earlier, Deputy Prime Minister Serik Zhumangarin reported that the Kazakh economy grew by 6.2% in the first half of 2025, the country’s fastest growth rate since 2011.

Economy

EDB Forecasts Kazakhstan’s GDP Growth to Accelerate to 5.5% in 2025

Kazakhstan’s gross domestic product (GDP) is projected to grow by 5.5% in 2025, up from an estimated 4.8% in 2024, according to the Eurasian Development Bank (EDB). The forecast suggests this growth rate will be sustained through 2026 and 2027. “We expect Kazakhstan's economic growth to accelerate to 5.5% in 2025 after 4.8% in 2024, with these rates remaining unchanged in 2026-2027,” said Aigul Berdigulova, Senior Analyst at the EDB’s Country Analysis Center, during the presentation of the bank’s macroeconomic forecast. She emphasized that government initiatives to boost investment, particularly through the national holding company Baiterek, will be pivotal. Funding volumes for the economy are expected to reach KZT 8 trillion (approximately $15.2 billion), equivalent to about 6% of GDP. “This measure will help unlock investment potential in manufacturing, transport, and construction,” Berdigulova said. According to the EDB, these investment-backed policies are expected to counterbalance external shocks. Additional growth drivers include expansion at the Tengiz oil field, projected to contribute 0.4 to 0.6 percentage points to GDP growth in 2025, and ongoing fiscal stimulus, regional development efforts, and infrastructure projects. Kazakhstan ranks fourth among the EDB’s member states in terms of projected GDP growth for 2025, following Kyrgyzstan (10.3%), Tajikistan (8.4%), and Uzbekistan (6.5%). It is on par with Armenia (5.5%) and ahead of Belarus (3%) and Russia (2%). Inflation Set to Rise in 2025 Despite the optimistic growth forecast, inflationary pressures are expected to intensify. The EDB projects Kazakhstan’s inflation rate will reach 11.9% in 2025, its highest among the bank’s member countries. “Inflation in Kazakhstan is rising this year due to the weakening of the tenge observed at the end of 2024,” Berdigulova explained. She also pointed to continued increases in utility tariffs and inflation expectations amid discussions of tax and budget reforms, including a planned VAT hike. Inflation is expected to peak in the second quarter of 2026 before declining to around 8.5% by 2027. For comparison, Armenia is forecast to have the lowest inflation among EDB members at just 3.1%. According to preliminary data from Kazakhstan’s Ministry of National Economy, the country’s GDP grew by 6% year-on-year in the January-May 2025 period. However, not all institutions are as optimistic. The European Bank for Reconstruction and Development (EBRD) recently revised its 2025 forecast for Kazakhstan’s GDP downward, from 5.2% to 4.9%.

Oil Production

Kazakhstan Braces for Economic Fallout from OPEC+ Output Hike

The latest OPEC+ decision to boost oil production in a strained global market threatens to push Kazakhstan closer to recession and further inflation. On May 3, OPEC+ members agreed to a significant increase in oil output for June. Leading financial outlets, including Bloomberg, suggest that the move is intended to penalize member states that have consistently breached their production quotas, most notably Kazakhstan and Iraq. The announcement triggered a sharp drop in oil prices. Production will rise by 411,000 barrels per day in June, following a tripling of output in May from the originally planned volume. Analysts attribute the shift to Riyadh’s growing frustration with non-compliant members. According to Rystad Energy analyst Jorge Leon, a former OPEC official, Saudi Arabia aims to “financially wear down” these states while aligning with U.S. President Donald Trump’s push for lower energy prices. Kazakhstan’s Overproduction at Tengiz Despite repeated assurances from Kazakhstan’s Ministry of Energy that they would honor OPEC+ agreements, the country exceeded its January quota by 32,000 barrels per day (bpd), producing 1.5 million bpd versus an allotted 1.468 million. This surge followed Tengizchevroil LLP’s launch of a new expansion phase at the Tengiz oil field in the Atyrau region, elevating output there to 870,000 barrels per day, 45% above the 2024 average. The expansion is expected to add 12 million tons annually to Tengiz’s crude production. Tengizchevroil is a joint venture comprising Chevron (50%), ExxonMobil (25%), KazMunayGas (20%), and LUKOIL (5%). Falling Prices and Criticism of OPEC’s Tactics Following the OPEC+ announcement, Brent crude futures fell to $59.30 per barrel on May 5, with U.S. WTI at $56.19. Some analysts argue Kazakhstan is being unfairly targeted. As Reuters reports, Kazakhstan contributes only 5% of OPEC+ production and under 2% of global output. Analysts at the Stankevicius Group note that larger producers such as the UAE, Russia, and Iraq have repeatedly breached quotas without facing similar scrutiny. They argue that Saudi Arabia’s surge in production undermines the cartel’s objectives more than Kazakhstan’s actions. “Saudi Arabia, which has sharply increased its oil production, is causing even greater damage to the OPEC+ agreement by encouraging lower prices," the analysts claimed. "In other words, Kazakhstan is maintaining a balance of interests and the interests of other cartel members. Meanwhile, other members are allowing themselves to disrupt the market balance.” Planning for a Downturn Oil revenues are central to Kazakhstan’s state budget, prompting government officials to prepare for a potential downturn. Deputy Prime Minister and Minister of National Economy Serik Zhumangarin stated in April that contingency plans are being developed for scenarios where oil prices fall to $55 or even $50 per barrel. However, the national budget is pegged to a $75 per barrel benchmark. According to analyst Murat Kastaev, social obligations make spending cuts politically infeasible, leaving the government reliant on increased transfers from the National Fund and a probable weakening of the tenge. While GDP growth could slow to 3-3.5% at current prices, a sustained drop to $40-50 per barrel may trigger a recession...

Economic Growth

Kyrgyzstan Reports Strong Economic Growth in Early 2025

Kyrgyzstan’s economy continued its upward trajectory in the first quarter of 2025, with GDP expanding by 13.1%, according to Prime Minister Akylbek Japarov. He credited the surge to positive developments across all key sectors prioritized by the government. The food industry posted remarkable growth of 71%, while the construction sector expanded by 69%. Investments in fixed capital jumped by 90% during the same period. A detailed economic overview published by the Ministry of Economy and Commerce highlighted that Kyrgyz businesses are adapting rapidly to shifting external conditions. The ministry also pointed to increased domestic demand and investment activity as key drivers of growth. "From January to March 2025, about 93% of total investments were directed toward mining, processing industries, information and communications, electricity and gas supply, and the construction of housing and educational institutions," the ministry stated. The construction sector alone contributed three percentage points to GDP growth. However, services remain the backbone of Kyrgyzstan’s economy, accounting for 4.5 percentage points of overall growth. Within the sector, trade made up 27.4%, transportation services 10.3%, and financial intermediation and insurance services another 10.3%. Annual inflation stood just below 7% in the first quarter, with average prices for consumer goods rising by 3.5% during the reporting period.

economic slowdown

Tajikistan Predicts Economic Slowdown Amid Declining Remittances

Tajikistan's economic growth is projected to decelerate to 7.5% in 2025, largely due to weakening domestic demand, according to the latest regional economic review by the Eurasian Fund for Stabilization and Development (EFSD). Migrant Remittances: A Key Factor The anticipated slowdown is primarily attributed to a decline in remittances from labor migrants, which have historically formed a substantial share of Tajikistan’s GDP. EFSD analysts forecast that from 2025 to 2027, the volume of transfers will gradually normalize after peaking between 2022 and 2024. Despite this decline, the EFSD maintains that Tajikistan’s balance of payments will remain stable, helped in part by reduced capital outflows, including foreign currency purchases. Previously, the World Bank reported that migrant remittances accounted for 45% of the country’s GDP in 2024, the highest proportion globally. By comparison, remittances made up 24% of GDP in Kyrgyzstan and 14% in Uzbekistan. The Asian Development Bank (ADB) expects this share to fall to 37% in 2025. Inflation Pressures Rise EFSD economists also warn of mounting inflationary pressures. Inflation is projected to approach the upper limit of the National Bank of Tajikistan’s target corridor, 5% with an acceptable deviation of ±2 percentage points. Over the medium term, inflation is expected to stabilize within the target range. Food prices remain the primary risk to price stability, the EFSD cautioned. Exports, External Risks, and Trade Barriers The ADB has also published a forecast supporting a more restrained outlook, highlighting falling global prices for Tajikistan’s key exports, metals and agricultural goods, including aluminum, as an added drag on growth. Additionally, regional trade barriers are posing challenges. Uzbekistan recently raised import duties on Tajik cement, a move seen by analysts as part of a broader trend of protectionist policies in neighboring countries. External conditions are also exerting pressure. Economic slowdowns in Russia and China, Tajikistan’s primary trading partners, could suppress both export revenue and remittances, the majority of which come from migrant workers in Russia. GDP Projections and Sector Breakdown According to the ADB’s baseline scenario, Tajikistan’s GDP growth is expected to slow to 7.4% in 2025 and 6.8% in 2026. In contrast, Tajik authorities aim to maintain growth at no less than 8%. In 2024, the economy grew by 8.4%, a 0.1 percentage point increase over the previous year. GDP totaled 153.4 billion somoni (approximately $14 billion). The sectoral composition of GDP included agriculture (22.8%), industry (16.9%), trade (15.2%), transportation (9.3%), construction (8.1%), taxes (9.4%), and other services (18.3%). Despite the projected slowdown, ADB experts remain cautiously optimistic. They cite sustained investment in energy and industrial sectors, expanded agricultural and service output, and continued, albeit diminished, remittance inflows as key factors that will support Tajikistan’s economic momentum.