Oil Prices Skiddish Below $70: Breaking Down the Impact on Kazakhstan
Crude oil price dips under $70 mark
The recent drop in global oil prices, with Brent crude diving below $70 per barrel, creates a ripple effect on Kazakhstan's economy. As an oil exporter, the country is heavily dependent on oil revenues, and this decline calls for a closer look at the repercussions.
Taking into consideration the latest statistics, the price of August Brent crude futures on the London ICE exchange plummeted by 9.79 percent to $69.47 per barrel as of 08:50 AST. Similarly, August WTI crude futures decreased by 9.72 percent, settling at $66.66 per barrel.
To Escalate or De-escalate? The Influence on Global Oil Markets
The fall in oil prices follows Iran's missile strikes on a U.S. military base in Qatar. Amid fears of potential escalation, markets viewed Iran's actions as a de-escalation move, as Tehran did not target the strategically vital Strait of Hormuz. After Trump's announcement of a ceasefire between Israel and Iran, oil prices plummeted even further.
Kazakhstan's Economic Crunch
The decline in oil prices below $75 per barrel imposes significant challenges on Kazakhstan's economy. It's crucial to note that Kazakhstan's 2025 budget is based on an oil price of $75 per barrel. With the current price dip, the country's financial stability is under pressure, and the question remains whether it can sustain the consequences.
In a broader sense, the global drop in oil prices can lower production costs and inflationary pressures for oil-importing countries. However, for Kazakhstan, the effect is contractionary, and the risks of economic instability are on the rise. According to Kazakhstan's Applied Economics Research Center, the average Brent oil price in 2025 is forecast at around $74.60 per barrel due to geopolitical risks and tariff measures on significant trading partners[1].
The reduced oil revenues have already led to a nearly 40% drop in inflows to Kazakhstan's National Fund in the first quarter of 2025. This fund is crucial for stabilizing the economy and managing fiscal policy, so reduced inflows worsen the country's balance of payments[3]. Additionally, the decline in oil prices is expected to increase Kazakhstan's current account deficit significantly, from 1.3% of GDP in 2024 to about 3.5% in 2025, as oil exports form a substantial part of the country's external income[4].
The seemingly unavoidable repercussions include potential GDP slowdown and impact on public spending, investment, and social programs. This slowdown could constrain broader economic development, ultimately endangering Kazakhstan's financial stability.
In conclusion, the oil price drop below $75 per barrel has an adverse impact on Kazakhstan's economy, making it prone to fiscal and macroeconomic risks within the challenging global geopolitical and trade environment[1][3][4]. It's vital for Kazakhstan's government and policymakers to consider potential financial measures and strategies to navigate the challenges ahead.
The fall in global oil prices, with Brent crude diving below $70 per barrel, creates a worrying situation for Kazakhstan's industry, given its heavy reliance on oil revenues. This decline in oil prices, threatening Kazakhstan's financial stability, also impacts the country's energy sector, as lower oil prices can lead to increased energy costs domestically due to higher demands for natural gas as a substitute for oil.
As a result of continued low oil prices, Kazakhstan faces potential challenges in its finance sector, as reduced oil revenues may impact the country's balance of payments and increase borrowing costs from foreign lenders, further pressure its financial stability.
