Business Activity in Kazakhstan: Slowing Down but Staying in the Growth Zone, DKnews.kz reports.
In December 2024, Kazakhstan's business activity showed signs of deceleration but remained in positive territory, maintaining a steady growth trend since February 2024. According to Rustem Orazalin, Director of the Monetary Policy Department at the National Bank of Kazakhstan, the Business Activity Index (BAI) stood at 50.7 in December.
Business Activity Index: Sectoral Trends
The decline in the overall BAI can be attributed to slower activity in the manufacturing, services, and mining sectors:
- Manufacturing: The index dropped to 50.6 from 53.0 in November, indicating a slowdown in production growth.
- Services: Activity in this sector also decelerated, with the index falling to 50.8 compared to 51.4 in November.
- Mining Industry: This sector saw the most significant contraction, with the index dropping to 48.8 from 50.2, pushing it into negative territory. All components, including production volumes, new orders, and employment, saw declines.
Conversely, construction emerged as a growth driver. The index for this sector rose to 52.9 in December from 50.5 in November, buoyed by an increase in new orders and employment levels.
Business Climate Index: A Mixed Picture
The Business Climate Index (BCI), which reflects the overall business environment, also recorded a decline in December 2024.
- Current Business Conditions: While assessments of current conditions worsened, they remained positive overall.
- Future Outlook: Optimism about future business conditions remained unchanged, reflecting continued confidence in medium- to long-term prospects.
The business cycle indicator, referred to as the "business clock," stayed within the growth zone, signaling continued expansion potential despite the current slowdown.
Demand Dynamics: A Broad Slowdown
Businesses reported a deceleration in demand for their products and services across most sectors.
- Construction Sector: This was the only sector to maintain growth in demand.
- Mining Industry: A slight decline in demand was observed compared to the previous month.
- Manufacturing and Services: Both sectors experienced a notable slowdown in the pace of demand growth.
Key Business Environment Factors
Survey respondents highlighted minor improvements in infrastructure but expressed concerns over other factors affecting the business environment:
- Business Protection: Challenges in safeguarding business operations were noted as a persistent issue.
- Tax Burden: High taxes continued to place pressure on businesses.
- Access to Finance and Credit: Limited access to financial resources remained a critical constraint on growth.
Future Outlook
Despite the slowdown, the growth in the construction sector and positive assessments of current conditions suggest resilience in Kazakhstan's economy. The optimism regarding future business conditions further underscores the potential for recovery and sustained growth. However, addressing structural challenges such as high taxes, business protection, and access to credit will be crucial for maintaining momentum.
December 2024 marked a period of slower business activity in Kazakhstan, revealing vulnerabilities in key sectors such as mining, manufacturing, and services. However, the construction sector's strong performance and sustained optimism about future conditions offer a positive outlook. By addressing critical business environment issues, Kazakhstan can leverage its strengths to ensure robust and sustainable economic growth in 2025.
