Fear of new VAT: Kazakhstan’s services sector reports low confidence
The Freedom Holding Corp. PMI Business Activity Index remained below the neutral threshold of 50.0 in December, completing a full quarter of monthly declines in business activity. That said, the index ticked up to 49.5 from 48.7 in November, signaling only a marginal drop in service sector output — the weakest in the current run of decline.
The ongoing slowdown in new business growth persisted. Companies were also less optimistic about the 12-month outlook for activity. Sentiment fell to its lowest level since April 2020 amid concerns about the impact of the upcoming VAT increase.
What’s happening in the sector?
New business increased for a 14th consecutive month in December, but the pace of expansion has eased month over month since June 2025. The latest uptick was mild, the weakest in 10 months. Where firms experienced an increase in new business inflows, anecdotal evidence attributed this to the signing of new contracts. However, many panelists also noted that the rise in contract wins was often driven by clients bringing forward purchases ahead of the VAT changes set to take effect in 2026.
Expert’s opinion
According to Yerlan Abdikarimov, head of the Financial Analysis Department at Freedom Finance Global PLC, the current situation reflects a «cooling of business sentiment.»
«Some easing of inflationary pressures at the end of the year is linked less to fundamental factors and more to the increased price sensitivity of service consumers, indicating persistent margin issues in the sector. Taken together, these factors reflect a cooling of business sentiment, largely driven by heightened concerns ahead of the upcoming tax changes. As a result, 12-month expectations were adjusted downward, although they still remain in the zone of moderate optimism.»
The situation in the service sector correlates with the overall state of the economy. It was previously reported that the manufacturing PMI, by contrast, entered growth territory (51.0), although optimism there also fell to a 2020 low due to tax uncertainty.
The decline in the service sector has been observed throughout the quarter. In November, analysts attributed this decline to logistical difficulties and cargo delays at the Russian border. Now, a fiscal factor has emerged.
