The three pillars of Kazakhstan’s foreign trade are the European Union, China and Russia
Kazakhstan’s key foreign trade partners have traditionally been macroeconomic centers such as the European Union, China, and Russia.
Prior to the pandemic, the EU was the destination for no less than half of the country’s exports (50% in 2014, 51% in 2018), while from 2020 to 2024 (from January to September) the EU’s share averaged 41%. In the past, Russia was the recipient of no more than 10% of exports from Kazakhstan, yet since 2020 this share has ranged from 10% to 13%. As of the end of nine months of last year, Russia’s share was 11%, which is considerably below the EU and China (the latter increased its share in exports to 18–19% in 2023 and 2024).
Mainly fuel and energy products are exported to the EU and China, and agricultural products are also supplied to China. The structure of exports to Russia is dominated by products of the chemical industry and related industries, machinery and equipment, metals and metal products.
Imports from the EU are rather consistent — annually the EU sends around 17% (18.1% in January to September 2024) of its total imports to Kazakhstan. China’s share in the country’s imports amounted to up to 20% prior to the pandemic. Since 2021 it has exceeded this and as of the end of three quarters of 2024 stood at 25%. Russia is also a key trade partner of Kazakhstan — its share in imports to the country is around 30%.
The EU and China import different types of finished products to Kazakhstan, while Russia imports metals and metal products, food, vehicles and equipment, and products of the chemical industry and related industries.
The EU remains Kazakhstan’s key trade partner by total turnover (Italy plays the main role here, importing oil and gas raw materials). Russia ranked second in terms of trade turnover with Kazakhstan prior to 2023, but in 2023 and 2024 it ceded this position to China and moved into third place.
In 2014 to 2020, the EU, Russia and China in total accounted for approximately two thirds of Kazakhstan’s foreign trade turnover, while from 2021 to September 2024 this share increased to 71–72%.
These macroeconomic centers continue to play a key role for Kazakhstan in terms of both exports and imports — 76% and 73% for three quarters of 2024, respectively.
Consequently, the geographic concentration of Kazakhstan’s external trade continues to strengthen, which may result in risks for its economy —import of inflation, devaluation shocks, and weakening of food security.
Figure 1. Shares of three main foreign trade partners in Kazakhstan’s exports and imports
Sources: national agencies, ACRA
What is the situation surrounding trade with neighboring economies?
Despite the dominant positions of the EU, Russia and China in Kazakhstan’s foreign trade and the further strengthening of the focus on these three sales markets, some areas of trade with medium-sized economies remain promising. For a number of them, Kazakhstan is an important trading partner (in the top 10) in terms of mutual foreign trade volumes — this includes Uzbekistan and Kyrgyzstan. Although trade with Turkey, South Korea, the US and Switzerland account for shares in trade turnover comparable to those of Uzbekistan and Kyrgyzstan (Fig. 2), Kazakhstan is not a large or priority trading partner for these countries.
Sources: national agencies, ACRA
Kazakhstan can quite naturally reduce its geographic dependence in foreign trade, increase the diversification of trade routes and boost trade volumes with the countries with which it shares common borders and has resolved issues of simplified transport corridors and border control, in whose markets products from Kazakhstan may be more recognizable and in demand. The economies of Uzbekistan and Kyrgyzstan are medium-sized in terms of trade and sales markets, and the trade ties between them an Kazakhstan are broadening, but generally remain moderate (Fig. 3). The potential for growth of the scale of trade is obvious, given the active development of these economies, as well as their focus on as well as their focus on investment and consumer imports.
Figure 3. Kazakhstan’s foreign trade with Uzbekistan and Kyrgyzstan, USD mln
Sources: national agencies, ACRA
Dynamics and prospects of trade with Uzbekistan and Kyrgyzstan
Uzbekistan
Kazakhstan’s trade with the aforementioned neighboring economies has been steadily developing in recent years. This is especially true for Uzbekistan, with whom trade turnover in nominal dollar terms has increased by 2.1x over the decade (from 2014 to 2023). Exports of goods from Kazakhstan predominate in trade between the countries — over this period, net exports increased from USD 66 mln to USD 1.8 bln.
Kazakhstan exports agricultural, chemical and rolled metal products to Uzbekistan, and imports mainly textiles, flat iron products, and motor vehicles.
The development of trade is largely related to the active economic transformations taking place in Uzbekistan. Since 2017, the country’s economy has been showing steady growth — by an average of 5.2% per year — and it is one of the few in the world that maintained positive momentum even during the pandemic. The structure of the economy is gradually changing: the share of industry is growing1, while agriculture is declining2, which indicates the need to increase investments3 and creates the demand for investment goods, including investment imports. This gives Kazakhstan an opportunity to increase trade turnover.
An important feature of the Uzbek economy is a double deficit — budget and current account. These deficits are usually covered by the external debt of private companies and foreign direct investment. Consequently, economic activity in the country will be encouraged by increased domestic demand, which is supported by fiscal expansion and aggregate imports, including investment imports and imports of consumer goods and services.
An additional driver of the growing diversification of mutual trade should become the strengthening of the economy planned by Uzbekistan: as expected by the country’s economic authorities, its volume will reach USD 160 bln by 2030, and GDP per capita will amount to USD 4,000. This indicates the significant potential and attractiveness of this market.
1 From 17.8% of GDP in 2016 to 23.5% of GDP in 2023
2 From 29% to 23% of GDP in 2016–2023
3 In 2023, the volume of investments in fixed assets amounted to 34.8% of GDP (an average of 28% for 2014–2023)
Figure 4. Trade between Kazakhstan and Uzbekistan, USD mln
Sources: national agencies, ACRA
Kyrgyzstan
Kazakhstan’s trade surplus with Kyrgyzstan is also fairly stable, and trade turnover in nominal dollar terms increased by 60% in 2014–2023.
Mineral and chemical products are imported from Kyrgyzstan, and the main exports are machinery and equipment, agricultural and finished food products, as well as mineral products.
Kyrgyzstan population’s welfare is relatively low as the average per capita GDP is about USD 2,000 in current prices. At the same time, the country’s economy is open and highly dependent on other economies in terms of foreign trade, especially in commodity imports. In 2022–2023, Kyrgyzstan’s commodity imports showed sharp growth due to the increased volume of foreign trade with China4.
Kyrgyzstan shows rapid but volatile economic growth. For 10 years (from 2014 to 2023), the average annual growth in real terms was 3.7%, while in 2022 it reached a maximum of 9%, and, on the contrary, it fell by 8.6% in 2020.
Kyrgyzstan is rapidly increasing its transit potential, and the expected commissioning of the North-South transport corridor, which should become an alternative channel connecting the northern and southwestern regions of the country, is of particular importance for increasing trade volumes. Construction of a railway line from Kashgar, China, to Andijan, Uzbekistan, through the territory of Kyrgyzstan has also begun as part of the Belt and Road Initiative. In addition, joint integration processes involving Kazakhstan and Kyrgyzstan, such as the EAEU and CIS platforms, provide opportunities for growth of exports of goods.
Although the Kyrgyz market is inferior in scale to that of Kazakhstan’s other trade destinations, it has a potential for growth in view of the openness of the Kyrgyz economy and the improvement in trade and transport infrastructure.
In conclusion, Kazakhstan’s increased focus on foreign trade with its three main partners, which traditionally include the EU, Russia, and China, increases the risks associated with the external sector for the country’s economy. In view of this, the potential for Kazakhstan’s cooperation with neighboring countries such as Uzbekistan and Kyrgyzstan is of particular importance, given the active growth of these economies and the existing volume of trade with Kazakhstan.
4 Kyrgyzstan’s import of goods in 2023 amounted to USD 11.5 bln or 82% of GDP; in Q3 2023 to Q2 2024 it amounted to USD 12.34 bln or 82.2% of GDP projected by ACRA for 2024.
