Uzbekistan’s economic future, as projected in the latest International Monetary Fund's (IMF) World Economic Outlook, reveals an environment of stable growth of 5.2% in 2024 and 5.4% in 2025, managed inflation, and improving labor markets through 2024 and 2025.
The IMF writes, “in emerging market and developing economies, growth is expected to be stable.” And this is true for Uzbekistan with only minor fluctuations in GDP and CPI.
Real GDP Growth:
The IMF projects Uzbekistan’s GDP growth to slow down from 6% in 2023 to 5.2% in 2024, 0.3% lower than forecasted in October 2023.
2025 The growth projection slightly increases to 5.4%. This indicates an expected consolidation of gains from ongoing reforms and investments, along with improved trade relations and potentially higher export volumes.
Consumer Price Index (CPI) Inflation:
Projected inflation remains high at 11.6% for 2024 however it is 0.4% lower than the October 2023 forecast for 2024. However, it is up 1.6% from 2023's report of 10%.
The IMF anticipates a reduction to 9.7% in 2025 as the effects of these policies stabilize, and food price volatility decreases with improved agricultural output and supply chain enhancements.
Uzbekistan's own forecasts are more optimistic, with inflation expected to decrease to 7.7% by the end of 2024.
In the IMF's December review, it was highlighted that recent hikes in regulated energy prices, such as the October 2023 increases in electricity and natural gas tariffs for legal entities, are expected to spur inflationary pressures.
Starting May 1, similar increases will apply to the general population, coupled with new consumption norms for energy resources, and businesses will need to adhere to a 100% prepayment rule for these resources.
Additionally, another rise in tariffs for individuals is scheduled for April of the next year, driven by a 66% surge in inflation over the past five years, as reported by the Ministry of Economy and Finance. However, the potential inflationary impact from these tariff adjustments is anticipated to be mitigated by the central bank's stringent monetary policies and significant fiscal consolidation efforts.
Labor Market Outlook
Uzbekistan’s unemployment is expected to decrease to 7.9% from 8.4% in 2023. This improvement is likely driven by job creation in emerging sectors and large-scale public infrastructure projects.
The unemployment rate in 2025 is projected to further decrease to 7.4%, supported by sustained economic growth and the maturation of investments in both public and private sectors.
ADB, World Bank, and IMF Projections:
ADB:
The Asian Development Bank forecasts that Uzbekistan's GDP will grow by 5.5% in 2024 due to challenges in the services and agriculture sectors, with a slight improvement to 5.6% in 2025 driven by industrial resurgence. Services are expected to grow steadily at 5.5%, while agriculture will slow to 3.5% due to potential water shortages. The construction and industry sectors are projected to grow at 6.0% and up to 6.3%, respectively, supported by strong domestic and external demand.
Inflation is anticipated to stabilize at 10.0% in 2024 and slightly reduce to 9.5% in 2025, despite recent energy price hikes and stringent monetary policies. Fiscal deficit aims are set to narrow to 4.0% of GDP, supported by stable tax revenue and controlled public expenditures. External borrowing will be capped at $5bn to keep public debt under control, while significant foreign investments are expected to fuel growth in key sectors like petrochemicals and mining.
World Bank: Slightly conservative compared to ADB but more optimistic than the IMF, the World Bank forecasts are likely factoring in the effectiveness of ongoing economic reforms and financial support from multilateral development banks.
In 2023 the World Bank reported that Uzbekistan achieved a 6% GDP growth, fueled by broad economic expansion and targeted fiscal stimuli. However, the World Bank projects a moderated growth rate of 5.3% for 2024, as the government plans to consolidate fiscal spending to address a growing fiscal deficit. This consolidation, along with slower export growth, is expected to temper the economic pace. Despite these challenges, inflation is anticipated to stabilize at around 8% in the medium term due to increased domestic energy costs. The past year also saw a rise in real wages, which contributed to reducing the poverty rate from 5.0% to 4.5%. However, disparities between wage growth among different skill levels have widened income inequality.
Uzbekistan has pressed forward with significant economic reforms, including setting up an independent energy regulator and privatizing state assets, which are aimed at improving the business environment and boosting private-sector investment. Challenges such as integrating a youthful workforce into the economy and reducing state dominance in strategic sectors remain central to the government’s reform agenda. The economy also benefited from increased investment and consumer spending, which supported the 6% GDP growth, while stringent monetary policies helped lower inflation to its lowest in seven years at 8.8%. Despite these gains, the fiscal deficit widened to 5.8% of GDP, necessitating foreign gas imports due to reduced domestic production. These structural adjustments are vital for sustaining Uzbekistan’s economic stability and growth.
IMF: The IMF's more conservative projections could be attributing a higher risk to external factors such as global economic slowdowns and trade disruptions.
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