Kazakhstan’s service sector recorded “only a fractional decrease” in December following the “modest contraction” recorded in November, according to the latest Freedom Holding and S&P Global PMI survey. 

Despite the stabilisation in output, momentum in new business continued to weaken. Firms also reported a deterioration in confidence regarding the 12-month outlook, with sentiment falling to its lowest level since April 2020 amid concerns over an anticipated increase in VAT.

Employment conditions remained under pressure, as workforce reductions extended into a fourth successive month. Moreover, the pace of job losses accelerated compared with November, indicating intensifying cost and demand pressures.

The headline indicator of the survey is the Business Activity Index, derives from a single question assessing month-on-month changes in business volumes. The index is scaled from 0 to 100, with readings above 50 signalling expansion and those below 50 indicating contraction. Figures are seasonally adjusted.

In December, the Freedom Holding PMI Business Activity Index remained below the neutral 50.0 mark, marking a third consecutive month of declining activity in the service sector. However, the index edged up to 49.5 from 48.7 in November, pointing to only a fractional reduction in output and the mildest contraction recorded during the current downturn.

Yerlan Abdikarimov, director of Financial Analysis Department at Freedom Finance Global, commented: "In December, Kazakhstan's services sector showed a mixed performance: on one hand, the decline in business activity slowed, while on the other, the growth rate of new orders continued its steady downward trajectory that began several months earlier.

"Some easing of inflationary pressures at the end of the year is linked less to fundamental factors and more to the increased price sensitivity of service consumers, indicating persistent margin issues in the sector.”

“Taken together, these factors reflect a cooling of business sentiment, largely driven by heightened concerns ahead of the upcoming tax changes. As a result, 12-month expectations were adjusted downward, although they still remain in the zone of moderate optimism. During the implementation of the new Tax Code, it will become clear how effectively the service sector can adapt to the updated conditions," he added.