Kazakhstan's Slowing Services Sector and Its Implications for Commodity-Linked Markets

Kazakhstan's services sector, a cornerstone of its post-pandemic economic rebound, has shown signs of deceleration in late 2025, raising concerns about its broader implications for commodity-linked markets and emerging market interdependencies. While the sector drove a robust 5.2% growth in Q2 2025-its strongest performance since 2010-data from Q3-Q4 2025 suggests a moderation in momentum, with the Services PMI dropping to 52 points in August 2025 and inflationary pressures threatening consumption patterns, according to The Business Year. This shift underscores the fragility of Kazakhstan's economic model, which remains heavily reliant on commodity exports and global demand cycles.

A Tale of Two Halves: Q2 2025 Optimism vs. Q3-Q4 2025 Caution

The first half of 2025 was marked by a surge in services activity, particularly in transportation and storage (up 8.7% year-on-year) and healthcare (21% growth), driven by infrastructure investments and fiscal stimulus, according to TradingEconomics. These gains were critical in propelling Kazakhstan's GDP to a 6% annual expansion, with the services sector accounting for over 60% of total economic output, according to FocusEconomics. However, the second half of the year has revealed cracks in this momentum.

According to the AERC overview, the services sector's slowdown in Q3-Q4 2025 has contributed to a revised 2025 growth forecast of 4.5%, down from earlier projections of 5.1%. The AERC attributes this to a combination of domestic and external factors: rising inflation, which erodes consumer spending, and global uncertainties such as U.S. trade policy shifts and geopolitical tensions in key export corridors. For instance, Kazakhstan's oil and gas exports-worth over $25 billion annually-face potential disruptions if pipeline routes through Russia or China encounter regulatory or political hurdles, the Asian Development Bank warns.

Commodity-Linked Markets and the Services Sector Nexus

Kazakhstan's services sector is inextricably linked to its commodity-dependent economy. The transportation and storage sub-sector, for example, acts as a conduit for oil and gas exports, while wholesale/retail trade channels raw material demand from neighboring markets like China and Russia. A slowdown in these areas could ripple through global supply chains.

Data from FocusEconomics highlights that the services sector's contribution to GDP in Q2 2025 reached 35,173,411 KZT Million, but this figure is expected to plateau in Q4 2025 as inflationary pressures dampen business confidence, according to TradingEconomics. This trend is particularly concerning for commodity-linked markets, where Kazakhstan's role as a key supplier of uranium, copper, and oil is critical. For example, a 10% decline in services activity could reduce tax revenues from oil duties by up to 15%, forcing the government to draw more heavily on its National Fund-a buffer that the World Bank noted had already been tapped to offset fiscal shortfalls in 2024.

Emerging Market Interdependencies and Risk Amplification

The services sector's slowdown also amplifies risks for emerging market interdependencies. Kazakhstan's economy is deeply integrated with China's Belt and Road Initiative (BRI), with over 40% of its exports passing through Chinese ports and logistics hubs, a World Bank commentary observes. A weaker services sector could delay infrastructure projects like the Khorgos dry port, which is pivotal for reducing transit times between Europe and Asia.

Moreover, a DKNews summary of IMF analysis projects that Kazakhstan's reliance on commodity exports makes it vulnerable to global price swings; for instance, a 20% drop in oil prices could shave 1.5 percentage points off GDP growth in 2026, the analysis suggests (see DKNews summary). This risk is compounded by the country's limited diversification; non-oil exports account for just 12% of total exports, leaving the economy exposed to external shocks, according to Astana Times.

Strategic Implications for Investors

For investors, the key takeaway is the need to balance optimism about Kazakhstan's short-term fiscal stimulus with caution regarding long-term structural vulnerabilities. While the government's 2025 budget allocates 18% of GDP to infrastructure and social programs, these investments are contingent on stable commodity prices and manageable inflation, and the surge in healthcare was noted by EconomyKZ. A sharper-than-expected slowdown in the services sector could force policy makers to prioritize debt servicing over growth initiatives, further straining public finances.

In commodity-linked markets, investors should monitor pipeline infrastructure developments and geopolitical risks in Central Asia. For example, the Tengiz oil field expansion-a $12 billion project expected to boost production by 300,000 barrels per day-remains a critical growth lever, according to TradingEconomics indicators. However, delays in this project due to services sector bottlenecks could disrupt global oil markets, particularly if OPEC+ supply cuts create a vacuum.

Conclusion

Kazakhstan's services sector slowdown is a microcosm of broader challenges facing commodity-dependent emerging markets. While the country's 2025 growth projections remain cautiously optimistic, the interplay between domestic fiscal constraints and global demand risks necessitates a nuanced investment approach. Investors must weigh the potential for policy-driven recovery against the fragility of a services sector that is both a growth engine and a vulnerability.