Kazakhstan’s fiscal deficit is projected to narrow to 2.7% of GDP in 2026, but remains elevated as is reliance on the National Fund for budget support. Public debt is low and mostly domestic, but rising borrowing costs and persistent deficits could erode fiscal space. The tenge remains vulnerable to external shocks, particularly ruble and oil price fluctuations. The banking sector is well capitalized, with improved risk-based supervision, but legacy problem assets and related-party transactions pose ongoing risks. Corporate insolvencies are appreciable, reflecting uneven business conditions and payment behavior. Debt collection and intercompany transactions continue to present moderate risks. Effective tax reforms and improved revenue mobilization are critical to reducing fiscal vulnerabilities and supporting long-term investment.

Kazakhstan’s business environment is shaped by its strategic location and resource wealth, but hampered by weak governance, corruption and market dominance by politically connected elites. Infrastructure gaps, especially in energy and logistics, constrain competitiveness, with recurrent power shortages highlighting underinvestment. The government is pursuing privatization and limiting new state-owned enterprises to foster competition, but implementation remains slow. Tax collection is low, and the regulatory environment remains unpredictable, with frequent policy shifts and interventionist measures. Membership in the Eurasian Economic Union and China’s Belt and Road Initiative offers trade opportunities, but also increases exposure to geopolitical risks. Progress in digitalization and private sector investment is positive, yet the institutional framework and legal protections for investors require strengthening to attract and retain FDI.  

Political stability remains fragile, with President Tokayev consolidating power and curbing dissent since the 2022 unrest. The government’s authoritarian approach, including restrictions on media and civil society, may deter some investors despite ongoing FDI inflows. Industrial unrest, particularly in the energy sector, continues to pose social and economic risks. Kazakhstan’s foreign policy balances relations with Russia, China and the West, but the country is exposed to spillovers from regional conflicts and sanctions. The proposed Russia-China pipeline and new transport corridors, such as the Middle Corridor, underscore Kazakhstan’s strategic importance, but also heighten geopolitical sensitivities. Addressing social grievances, fostering pluralism and advancing institutional reforms are essential for long-term political viability and economic stability.