Growth Without Oil: EBRD Sees Kazakhstan as Central Asia's Laggard

Central Asia Column “Steppe Ahead”

4.7% growth for 2026: Kazakhstan remains at the bottom of the pack in Central Asia. This is the forecast from the European Bank for Reconstruction and Development (EBRD) in its regional outlook released on September 24. The region as a whole is expected to grow by 5.8% this year. Central Asia’s largest economy is thus growing more slowly than all four of its neighboring countries, as its most important sector—oil production—is shrinking.

Oil production falls by 8.8%

From January through July, Kazakhstan produced 53.21 million metric tons of crude oil. That was 8.8% less than in the same period last year, according to the Azerbaijani news agency Trend, citing Kazakhstan’s Statistics Agency. The EBRD cites disruptions along the Caspian Pipeline Consortium’s export route and incidents at the Tengiz oil field as the reasons. As recently as mid-September, a drone incident had once again interrupted loading operations in Novorossiysk, Russia. A good 80% of Kazakhstan’s oil exports travel via this route.

Nevertheless, the economy grew by 4.1% year-over-year from January to July. According to the Statistics Agency, gross domestic product reached 70.9 trillion tenge, equivalent to approximately 155 billion U.S. dollars. The drivers of growth lie outside the oil sector: Construction rose by 15.2%, manufacturing by 9.8%, and transportation and warehousing by 7.1%. Manufacturing alone contributed 1.25 percentage points to growth, while trade added 0.93 points. According to the EBRD, mechanical engineering, food processing, and the chemical industry are driving the economy. Agriculture is also contributing: According to Trend, Kazakhstan had already harvested 16.2 million metric tons of grain by mid-September. Deliveries to silos were one and a half times higher than a year earlier.

Neighboring Countries Are Growing Significantly Faster

The gap with the rest of the region is wide. Kyrgyzstan grew by 11.1% in the first half of the year, and the EBRD expects 8.7% for the full year. Uzbekistan grew by 8.5%. The bank raised its forecast for the country from 6.5% to 7.5%, the only revision among the five countries. Tajikistan grew by 8.2%; the forecast is 7.9%. There, exports of mineral products increased in value by 57.2% compared to the previous year. For Turkmenistan, the EBRD expects steady growth of 6.3% through 2027. The drivers are similar across the region: government construction programs, a growing industrial sector, and robust consumer spending, fueled in part by remittances from migrant workers in Russia. It is precisely this dependence that the EBRD identifies as a key risk: a weaker Russian economy would directly impact Kyrgyzstan, Tajikistan, and Uzbekistan.

Central Asia and Mongolia combined for 5.9% growth in the first half of the year. For 2026, the EBRD expects 5.8%, following 6.9% in 2025. For 2027, it forecasts 5.3%. Central Asia thus remains the fastest-growing region across the bank’s entire operating area, which encompasses more than 30 countries from Morocco to Mongolia. Kazakhstan, at 4.7%, lags significantly behind. The EBRD forecasts 4.5% growth for the country in 2027. The Asian Development Bank (ADB), in its outlook also published on September 24, arrived at nearly the same figure: It maintained its forecast for Kazakhstan at 4.8% for 2026 and 4.5% for 2027. Two institutions, one conclusion: Without oil, the region’s giant will remain a moderate growth story for the time being.

Central Bank Cuts Interest Rates and Remains Cautious

Monetary policy is now supporting the economy again. On September 4, the National Bank cut the key interest rate by 50 basis points to 16.25%, the third consecutive cut. Inflation fell to 9.8% in August, returning to single digits for the first time after nearly a year of declining rates. Food prices rose by 9.5%, services by 8.9%, and industrial goods by 11.4%. “The balance of risks remains tilted toward inflation. We are therefore determined to maintain moderately tight monetary conditions,” said National Bank Governor Timur Suleimenov, according to the English-language Kazakh newspaper Astana Times. His stated goal: stable inflation of around 5% in 2028. Household inflation expectations are also easing, having recently fallen to 12.1% from 13.4% the previous month. The next interest rate decision is scheduled for October 23.

The National Bank itself is more optimistic than the EBRD and is sticking to its 2026 growth forecast of 4.5% to 5.5%. Whether the upper end of that range is achievable depends on oil. The EBRD identifies three risks for Kazakhstan: new disruptions to export routes, weaker demand from key trading partners, and falling commodity prices. All three are beyond Astana’s control. At the same time, the figures show how far diversification has already come: industry and construction are keeping growth above 4%, even though the oil sector has lost nearly 9%. Astana would have preferred to avoid this test, but it has passed it so far.

Source: EBRD, Trend, Trend, Trend, Astana Times, Astana Times (all EN)