In May 2026, Kazakhstan’s private sector reported growth in business activity for the second consecutive month. The services sector emerged as the main driver of the economy, with rising orders supporting overall expansion. However, mounting cost pressures prompted companies to implement the largest workforce reductions in more than two years.
Service sector: Orders increase despite margin pressure
In May, the Freedom Holding Corp. Purchasing Managers’ Index (PMI) for Kazakhstan’s service sector eased to 52.7 from 53.9 in April but remained above the 50-point mark that indicates expansion in business activity.
Panelists attributed the growth to new client acquisitions and stronger sales. The new orders index increased for the third consecutive month, while the overall degree of positive sentiment improved to a nine-month high.
Despite an increase in input costs, driven by higher raw material and labor expenses, the pace of output charge inflation was only modest, the slowest in a year-and-a-half. While some businesses chose to pass on higher costs to clients, others offered discounts in order to boost sales.
Labor market pressures lead to workforce cuts
Despite the sector’s positive performance in May, service firms in Kazakhstan streamlined their workforce numbers for a fourth successive month. As companies sought to reduce operating expenses and protect profitability, the pace of job cuts accelerated to its fastest rate in 30 months.
The trend is also reflected in broader economic data. Analysts have highlighted one of this year’s key paradoxes: over the past nine months, the services sector has recorded strong sales growth and become the primary driver of GDP growth amid weakness in other industries. However, that revenue growth has been accompanied by significant reductions in staffing budgets.
Composite PMI highlights divergence between services and manufacturing
Kazakhstan’s composite PMI, which combines data from the services and manufacturing sectors, rose to 51.4 in May from 51.1 in April, marking its highest level in 10 months.
The improvement was driven entirely by the services sector, while manufacturing activity continued to contract, with new orders remaining under pressure.
According to Saltanat Mukhambetaliyeva, head of economic research and analytics at Freedom Holding Operations, Kazakhstan’s services sector continued to expand in May, although signs are emerging that businesses are shifting from a growth-oriented model toward a more adaptive approach.
«Despite a steady inflow of new orders, companies continue to reduce headcount amid significant margin pressure and limited pricing flexibility. This suggests that businesses are facing growing challenges in maintaining operational efficiency. Declining real incomes and slower growth in consumer lending continue to weigh on domestic demand, while the full impact of rising utility tariffs has yet to be felt. Against this backdrop, business expectations for the year ahead remain moderately optimistic, with mid-sized companies showing the greatest resilience,» the expert said.
