Kazakhstan’s economy still relies heavily on extractive industry
Resource dependence continues to significantly influence Kazakhstan’s economy. In 2024, the country continued to experience the Dutch disease, as the national currency appreciation, driven by natural resource exports, hindered the growth of other economic sectors. Over the first 10 months of 2024, external trade turnover reached $116.9 billion, with net exports totaling $20.1 billion. The crude oil exports accounted for 54.4% ($68.5 billion) of the total volume, indicating the economy’s dependence on the extractive industry.
Despite the need for economic diversification, the processing industry’s contribution to GDP has remained at 11.6% over the last 15 years. Investments in the nominal capital of the processing industry accounted for just 10.5%, falling behind the mining industry (20.3%).
Difficulties in accessing essential infrastructure are among the key reasons for low activity in the processing industry. Often, businesses have to establish utility systems themselves or rent premises with necessary infrastructure already installed, which, of course leads to increased costs. Additionally, it’s worth noting that the GDP growth had been primarily driven by the service industries, particularly wholesale and retail trade, which contributed 16.2% over the first nine months of 2024. These dynamics create new challenges for the long-term sustainable development of the country.
The issue of drawing money from the National Fund remains relevant. In addition to the $3.8 billion guaranteed transfer, the government also utilizes targeted transfers, the volume of which exceeded the planned limits in 2024. Authorities often rely on these funds as «a friend in need» to cover the budget deficit and for debt servicing. Of course, more efficient management of these resources is required.
In my opinion, to shore up the economy, it’s essential to stimulate the development of the processing industry, improve infrastructure and implement balanced business support measures. By focusing on non-commodity sectors, you can strengthen the economy structure, making it more stable and balanced. The problem is further exacerbated by the fact that high commodity export revenues allow the government to temporarily mitigate socio-economic challenges but create a risk of economic growth becoming dependent on market volatility in the long run.
