Uzbekistan, a Central Asian nation, has emerged as a resilient economic force amidst global challenges. The International Monetary Fund (IMF) recently concluded a mission to assess the country's economic developments, providing valuable insights into the nation's achievements, potential risks, and recommended policy priorities.
Economic Resilience and Growth
Despite recent global challenges, Uzbekistan's economy has demonstrated remarkable resilience. The influx of migrants and a surge in remittances in 2022, following geopolitical shocks, contributed to a robust 5.7% real GDP growth. In 2023, a sizable fiscal expansion, high wage growth, and increased exports are expected to sustain this growth at the same rate.
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Key Economic Indicators
The selected economic indicators from 2020 to the projected 2024 highlight Uzbekistan's economic performance. Noteworthy figures include a steady increase in real GDP growth, nominal GDP, and GDP per capita. The population growth also remains steady, while inflation is expected to decline to 9% by the end of 2023.
Challenges and Risks
Despite the positive outlook, Uzbekistan faces challenges and risks that require careful attention. The external current account deficit is expected to rise due to strong imports and declining remittances. External risks emanate from potential economic slowdowns in key trading partners such as China and Russia, as well as tightening external financial conditions. Domestically, contingent liabilities from state-owned enterprises (SOEs) and public-private partnerships (PPPs) pose risks.
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Policy Recommendations
To safeguard macro-financial stability and sustain economic growth, the IMF recommends several policy measures. These include a return to fiscal consolidation after an expansionary stance in 2023, targeting a reduction in the consolidated fiscal deficit to 4% of GDP in 2024 and 3% in 2025. Fiscal consolidation aims to build buffers against potential shocks and reduce inflation, benefiting the vulnerable segments of the population.
Monetary policy is advised to remain tight to combat inflation, with a commitment to adjusting policy rates if needed. The IMF acknowledges the efforts of the Central Bank of Uzbekistan (CBU) and emphasizes the importance of exchange rate flexibility to absorb potential shocks and safeguard reserves.
Continued financial sector reforms are deemed crucial to maintaining stability. Despite tight monetary policy, credit growth remains high, necessitating additional supervisory and macroprudential measures. Efforts to enhance corporate governance and transparency in state banks are essential for facilitating bank privatization and improving financial intermediation.
Structural reforms are highlighted as key to sustaining robust growth. Uzbekistan has made progress in public procurement transparency, SOE management, and privatization. However, further measures are recommended, including increasing energy prices to cost recovery levels, enhancing governance and transparency, restructuring and privatizing state enterprises, and strengthening competition policies.
Uzbekistan's economic resilience is commendable, but challenges persist. The IMF's recommendations underscore the importance of prudent fiscal and monetary policies, ongoing structural reforms, and measures to address domestic and external risks.
Standard & Poor's (S&P) has upheld Uzbekistan's foreign currency long-term credit rating at 'BB-' with a stable outlook. Despite nine countries facing credit downgrades or outlook adjustments since early 2023, Uzbekistan has sustained its standing, leveraging substantial external reserves. These reserves empower the country's leadership to navigate potential adverse global economic impacts in the coming year.
Earlier Daryo informed that the global report on the world economic outlook by the International Monetary Fund highlighted Uzbekistan's encouraging Real GDP trend. Despite a significant dip in 2020 due to Covid-19, with a percentage decrease to 2%, the projections indicate a modest decline to 5.5% for the current year, remaining stable for 2024 and 2028.
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