By mid-2025, the global economic landscape increasingly resembles a prolonged theatre of dysfunction, as in the comedy ‘It’s a Mad, Mad, Mad, Mad World’, in which characters rush in panic towards a treasure trove of obstacles: global players are trying to solve perennial conflicts – often at the cost of deepening global uncertainty. Escalation in the Persian Gulf, U.S. trade disputes between the United States and both China and Europe, and the ongoing war in Ukraine create the impression of a world drifting without clear direction. The cover of the review captures this atmosphere: a chaotic scene inspired by Alice in Wonderland, symbolizing the loss of reference points and growing irrationality in international affairs.
Against this background, global growth remains positive but subdued. The World Bank projects global GDP growth rate at 2.3% in 2025 – one of the weakest performances in recent decades. Meanwhile, the latest IMF forecast showed a slight improvement: global GDP is expected to grow by 3.0% this year.
In these external environments, Kazakhstan, being a small open economy vulnerable to external shocks, continues to show almost paradoxically accelerated growth. Like Alice advancing through Wonderland, the country appears to move forward even as the ground beneath becomes increasingly unstable. The short-term economic indicator, which tracks the dynamics of the main sectors of the economy, showed growth at 9% YoY in H1 2025, mainly due to the rapid development of transport and construction. However, there are some worrying signs underneath this facade: a slowdown in manufacturing, crowding out of private investment by public investment and worsening inflationary pressures.
Simultaneously, Kazakhstan’s terms of trade are deteriorating. In the first five months of 2025, exports declined by 9.2% YoY, while imports continued to rise moderately. Falling oil exports have led to declining revenues for the National Fund – further straining the fiscal position. In response to the growing external pressure, the government has turned to an expansionary fiscal impulse aimed at stimulating domestic demand. Yet questions concerning the sustainability of this approach persist, particularly in the second half of the year when much of the stimulus is expected to taper off. With revenue collection under pressure, public spending support may prove short-lived.
Although the current account of the balance of payments remained positive in Q1, the deterioration of oil price dynamics increases the probability of its transition to the deficit zone in the second half of this year. In this case, Kazakhstan may face a “double deficit” for a third consecutive year – a simultaneous budget and current account deficit. Such a combination is particularly dangerous for a small open economy, as it can undermine long-term macroeconomic sustainability. On the one hand, fiscal expansion widens the budget deficit and fuels inflation. On the other hand, a current account deficit driven by rising imports heightens demand for foreign currency, putting pressure on the exchange rate and increasing the risk of further depreciation. These factors amplify inflationary pressure through multiple channels.
Against this backdrop, AERC has revised its 2025 inflation forecast upward from 9.8% to 11%, to reflect the effect of expanded fiscal policy and currency depreciation. At the same time, conceding to the official statistics of the first half of the year, the GDP growth forecast was revised upwards to 4.9% from 4.5% in the previous survey, taking into account the contribution of infrastructure investment and consumer demand. However, AERC remains cautious about the sustainability of the growth trajectory.
The general government budget deficit is now projected at (-)2.5% of GDP compared to (-)2.4% in the April’s overview, as well as the current account deficit forecast for the balance of payments was increased to (-)7.2% of GDP.
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