Central Bank's rate cut to increase Uzbekistan’s GDP by 0.55% - CERR

The Central Bank's rate cut from 15% to 14% would increase Uzbekistan’s GDP by 0.55% in 2023, media reports referring to the Center for Economic Research and Reforms (CERR). Using the IS-LM macroeconomic model,  the CERR experts analyzed the recent reduction of the regulator’s core rate by one percentage point. 

Lowering the Central Bank’s key rate will reduce real interest rates in the economy, stimulating consumption growth and making it less profitable for people to keep bank deposits. As a result, the borrowing cost will also decline.

As per the report, the rate cut would expand the volume of loans issued to the population by 2.6% and gross consumption - by 0.2% compared to the baseline scenario.

Also, according to an International Monetary Fund (IMF) study, a change in the key rate by one percentage point results in a shift in credit rates of 0.6 percentage points on average and in deposit rates of 0.35 percentage points.

In turn, commercial banks will reduce lending rates to stimulate private investment. As a result, the gross investment will increase by 0.68%.

The change in the key rate will increase by 3.6% in the volume of loans issued in agriculture and by 2.8% and 2.7% in construction and industry. A little over 1% will expand the credit allocated for trade and transport with communication.