Kazakhstan’s manufacturing sector saw a sharp intensification of inflationary pressures in January due to an increase in VAT, which pushed input costs markedly higher, according to the latest Purchasing Managers’ Index (PMI) report on the country released by Freedom Holding and S&P Global.

About 44% of respondents reported higher input costs at the beginning of the year, with inflation accelerating to its fastest pace since November 2022. Survey participants cited the VAT increase as the primary driver, alongside broader price rises for raw materials and services.

Overall conditions in the sector were subdued at the start of 2026. Output and new orders edged lower, although employment increased slightly and business sentiment showed a modest improvement.

The Freedom Holding Kazakhstan Manufacturing PMI slipped just below the neutral 50.0 threshold in January, signalling a marginal deterioration in operating conditions. The index fell to 49.8 from 51.0 in December.

Yerlan Abdikarimov, director of the financial analysis department at Freedom Finance Global, commented: "Kazakhstan’s manufacturing sector has started the year by returning to the zone of pessimism, where it remained from June to November last year. This was influenced not only by weak dynamics in new orders and demand, but also by the increase in tax burden, amplified by the introduction of new fiscal rules.

"In January, a sharp rise in the cost of purchased resources was recorded, which triggered a corresponding reaction in the sector with an equally sharp increase in selling prices – the monthly growth rate reached a record 27%, compared with an average of 3% during growth periods over the past seven years.

"Weak market conditions are accompanied by a continued, albeit modest, expansion of staff, likely to reflect the recruitment of personnel following a previous period of downsizing. Expectations over the next 12 months remain moderate against a backdrop of high uncertainty and pressure on operating margins.”