Kazakhstan’s service sector shows signs of recovery

Kazakhstan’s service sector showed signs of recovery in March, as the headline Freedom Holding Corp. PMI Business Activity Index rose from 48.0 in February to 49.2 in March. This indicates a softer and only slight decline in output across the sector.

Recovering demand and new clients

The milder decline in service sector output was supported by a marginal but renewed increase in new business. Following a moderate contraction in the previous survey period, new orders expanded in March. Respondents attributed the increase to new client acquisitions and improving underlying demand conditions.

Although the upturn was only slight, growth has now been recorded in 16 of the last 17 survey periods. Service providers that reported a decrease in activity cited funding constraints, the impact of January’s VAT changes and political uncertainty. However, incoming new work and customer gains helped offset the downturn.

Easing inflationary pressures

As the initial effects of the VAT increase at the start of the year began to fade, both PMI price indicators declined further at the end of the first quarter, signaling weaker inflationary pressures.

Despite these positive developments, service firms across Kazakhstan carried out a second consecutive – albeit minimal – round of job cuts in March. The pace of reduction remained unchanged from February. Data showed that the majority of surveyed firms maintained stable staffing levels during the month.

March also saw further easing of inflationary pressures following the earlier spike linked to the VAT increase. The rate of inflation fell to a three-month low and dropped below the long-term average. Where input costs continued to rise, respondents cited higher supplier and material prices.

According to Saltanat Mukhambetaliyeva, head of economics research and analytics at Freedom Holding Operations, Kazakhstan’s services sector demonstrated moderate recovery in March. The sector is adapting to the dual pressures of rising input costs and subdued demand. A positive signal was the slowdown in input price growth, which returned to levels seen in late 2025, alongside a recovery in new orders.

Amid a downturn in manufacturing, the services sector remained a stabilizing force for the economy in the first quarter. Business expectations for the year ahead continue to improve, reflecting cautious optimism, although they remain below the long-term average.

Earlier this week, Kursiv.media reported that Kazakhstan’s business activity deteriorated in March 2026, reflecting a significant weakening in the manufacturing sector – the sharpest since 2022 – due to tax reform.

The Kazakhstan Composite PMI Output Index also reflected this trend, edging down slightly from 47.2 in February to 47.1 in March. This marked a seventh consecutive monthly decline in private sector output. The pace of contraction was solid and the most pronounced since early 2022, with manufacturing leading the downturn. Meanwhile, the decline in new work showed signs of moderating, partly supported by a fresh, albeit marginal, increase in new business among service firms.