Uzbekistan's economy remains robust, with real GDP growth reaching 6% in 2023 and 6.2% in 1Q24, as noted by the IMF. Consumer price inflation decreased from 12.3% at the end of 2022 to 8.1% in April 2024 due to high real policy rates and lower international food and energy prices.
Uzbekistan's current account deficit expanded to 8.6% of GDP in 2023, compared to 3.5% in 2022. This increase was primarily due to higher imports of machinery and equipment, reduced remittances, elevated interest payments on foreign debt, and the repatriation of earnings by foreign-owned businesses, which counterbalanced the strong gold exports. Despite a $1.2bn decline, international reserves remain robust, covering almost nine months of imports as of April 2024.
The country's economic outlook is positive, supported by ongoing structural reforms, particularly in energy pricing and state enterprise privatization. Real GDP growth is projected to be 5.4% in 2024 and 5.5% in 2025, driven by strong domestic demand. Efforts to reduce the fiscal deficit, moderate bank lending growth, and slow import growth are expected to narrow the current account deficit. Although inflation may temporarily rise due to energy price adjustments, tight macroeconomic and structural policies will help bring it towards the Central Bank of Uzbekistan’s (CBU) target in the medium term.
The IMF identified external risks such as geoeconomic spillovers, commodity price volatility, and a potential global slowdown. Domestic risks include slower fiscal consolidation, weaker bank balance sheets, and potential liabilities from state banks, state-owned enterprises, and public-private partnerships. However, accelerated structural reforms, increased capital inflows, or higher export prices could enhance the economic outlook.
The IMF Executive Board commended Uzbekistan’s efforts to transform its economy, noting significant growth and poverty reduction despite challenges from the pandemic and geopolitical uncertainties. The Board endorsed the planned fiscal policy adjustments to maintain robust public finances, support monetary policy in containing inflation, and facilitate external adjustments. Emphasis was placed on broadening the tax base, modernizing the tax system, and improving public spending efficiency.
Monetary policy remains focused on reducing inflation to the CBU's target. Sustaining a high real policy rate and tight fiscal and macro-prudential policies will gradually lower inflation. The CBU should be ready to adjust policy rates if energy price reforms lead to broader inflationary pressures. Reducing state involvement in the financial sector, strengthening financial supervision, and promoting commercial operations in state banks are crucial for financial stability and deepening.
Continued reforms will support sustainable, inclusive, and green growth. Efforts should focus on accelerating state enterprise restructuring and privatization, eliminating state preferences, and enhancing competition. The government should also advance WTO accession efforts, increase women’s labour participation, and phase out energy subsidies to stimulate growth and support decarbonization.
The IMF recommended sustaining momentum in anticorruption measures and improving governance and the rule of law. Enacting asset declaration, conflict of interest, and whistleblower protection laws, along with enhancing the independence of prosecutors, judges, and the Chamber of Accounts, will improve accountability and public trust.
Earlier, Daryo reported that despite the challenges posed by the global economic environment, Uzbekistan's robust real income growth and safety net expansion since 2020 contributed to a steady decline in the poverty rate from 17% in 2021 to 11% in 2023, as per the IMF.
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