Kazakhstan reports lowest business confidence since April 2020 despite growing PMI
The Freedom Holding Corp. Kazakhstan Manufacturing PMI moved back above the 50.0 no-change mark in December, rising to 51.0 from 49.0 in November. The reading signaled the first improvement in the health of the manufacturing sector in seven months. That said, business conditions strengthened only slightly, with business confidence reaching its lowest level since April 2020.
Growth drivers
Renewed increases in output, new orders, employment, purchasing activity and stocks of inputs were all recorded in December. A rise in new orders helped support the sector’s return to growth, with firms linking this improvement to higher production, increased hiring and greater purchasing activity.
Negative factors
On the price front, both input costs and output charges increased faster than in November, although inflation rates remained relatively muted. Firms purchasing inputs continued to face a marginal lengthening of lead times, with vendor performance deteriorating at the same pace as in November. Companies frequently reported delays at the border with Russia. In addition, uncertainty surrounding the impact of an upcoming VAT increase continued to weigh on business confidence.
According to Yerlan Abdikarimov, head of the Financial Analysis Department at Freedom Finance Global, the sector remains affected by subdued demand and weak confidence, while accelerating costs and rising output prices pose additional risks to profit margins.
«Expectations for the next 12 months continued to decline, reaching a new multi-year low. The sector’s future dynamics will depend on how the new tax rules are implemented in practice,» he said.
The downward trend in business confidence began to emerge in the fall, as Kazakhstani businesses reported lower optimism amid discussions of the new Tax Code and the government’s plans to raise the VAT rate. Even at that stage, experts warned that tax reform could become a key factor weighing on business activity.
