Imports grew by 20 percent in 2021 from higher consumer demand and a resump- UZBEKISTAN Key conditions and tion of capital imports after a pandemic-in- duced slowdown. Exports grew by 10 per- challenges cent but were still below pre-pandemic levels, as demand remained weak in major Table 1 2021 After a wave of trade and price liberaliza- trading partners (Russia, Kazakhstan). Re- Population, million 34.9 tion reforms, the focus of reforms is shift- mittance inflows recovered, but only par- GDP, current US$ billion 69.2 ing to deeper structural constraints such as tially offset a large fall in gold sales (by GDP per capita, current US$ 1983.2 weak factor markets and dominant public 29 percent), leading to a wider current ac- a 100.1 School enrollment, primary (% gross) enterprises. These reforms are needed to count deficit of 6.6 percent of GDP in 2021, a 71.7 create a larger and more competitive pri- against 5 percent in 2020. Life expectancy at birth, years Total GHG Emissions (mtCO2e) 259.5 vate sector, which is key to addressing the The fiscal deficit increased to 6.2 percent of Source: WDI, Macro Poverty Outlook, and official data. economy’s legacy of state-led growth with GDP in 2021 from 4.5 percent in 2020, as a/ WDI for School enrollment (2020); Life expectancy weak job creation. expanded social assistance coverage and (2019). The government recognizes the need for a higher health and education spending off- more inclusive transition. About 7.5 per- set lower policy lending and higher tax cent of citizens lived below the World revenues from a rebounding economy. The Russia’s invasion of Ukraine will slow Bank’s lower-middle-income poverty line fiscal deficit was financed almost entirely Uzbekistan’s growth to 3.6 percent in in 2021. Many more live close to this line through new external debt, though the and are at high risk of poverty. One in government remained within its annual 2022, due to a halving of remittances, six households has a member working ceiling on new debt of $5.5 billion. Despite record global oil and food prices, trade, abroad, mostly in Russia. Reforms to ex- the drop in gold sales, international re- investment, and banking disruptions, and pand social assistance started during the serves increased by $0.2 billion in 2021 to the return of migrant workers. More so- COVID-19 pandemic will serve as an effec- about 51 percent of GDP. cial protection and labor market programs tive platform to expand safety nets and la- Inflation continued falling, averaging at bor market support programs to prevent 10.8 percent in 2021 (against 12.9 percent are needed to prevent increases in pover- a sharp rise in poverty—and enable struc- in 2020). Average annual inflation ty. Higher commodity revenues and lower tural reforms to continue. reached 9.8 percent at end-February 2022, public investment spending will create the first reversion to single-digits since fiscal space and, with tighter monetary 2017. Higher domestic and global food prices and shipping costs continued to policy, support macroeconomic stability. Recent developments drive inflation. In the three weeks fol- lowing Russia’s invasion of Ukraine, and Uzbekistan’s economy grew by 7.4 percent amidst lower remittance inflows and in 2021. Strong industrial and services heightened uncertainties, the som depre- growth helped temper still weak agricultur- ciated by about 6 percent against the US al growth. Robust household income and dollar. In mid-March 2022, in response investment growth and continued anti-cri- to exchange rate pressures and an un- sis fiscal support also supported growth. certain inflation outlook, the central bank FIGURE 1 Uzbekistan / GDP growth, inflation, FIGURE 2 Uzbekistan / Poverty, GDP per capita, and small unemployment business development Percent GDP per capita, US$ Percent 20 65.3 70 17.5 2,500 62.4 56.0 55.7 54.9 60 2,000 15 13.9 14.5 1,983 50 1,917 12.9 1,784 1,750 1,500 1,597 40 10.8 9.3 30 10 9.0 9.0 1,000 10.5 9.6 20 500 7.4 10 5 11.9 11.4 11 11.5 11 5.4 5.7 4.4 0 0 1.9 2017 2018 2019 2020 2021 0 Small business, % of GDP 2017 2018 2019 2020 2021 GDP per capita, US$, lhs GDP growth CPI inflation Unemployment rate National poverty rate, % of population, rhs Source: Uzbekistan official statistics. Source: Uzbekistan official statistics. MPO 45 Apr 22 (CBU) increased its policy rate by 300 ba- Higher revenues from commodity exports sis points to 17 percent. and privatization receipts and slower A reduction in subsidized lending and Outlook public investment spending are likely to high real interest rates slowed credit offset higher social spending to support growth to 18 percent in 2021 from 31 Russia’s invasion of Ukraine will slow remittance-dependent households and percent in 2020. Portfolio growth and growth to 3.6 percent in 2022, compared prevent an anticipated sharp rise in stronger risk regulations reduced the to pre-crisis estimates of about 6 per- poverty levels from falling remittances banking sector’s total capital adequacy ra- cent. An anticipated 50 percent fall in and the return of potentially large num- tio to 17.5 percent at end-2021 from 18.4 remittances (from a weaker ruble and bers of displaced migrant workers. As a percent at end-2020. the collapse of Russia’s economy) and result, the overall fiscal deficit is expected The banking system remains resilient, but higher oil, wheat, and cooking oil prices to fall to 4 percent of GDP in 2022. An non-performing loans rose from about 1-3 will sharply lower private consumption. anticipated fiscal consolidation by 2023 is percent of total loans between 2018 and Investment growth is also expected to now likely to be delayed. The govern- 2020 to 5.2 percent at end 2021—a result slow given the heavy reliance on Russ- ment is expected to continue adhering to of the pandemic. Capital and liquidity ian capital imports and bank financing its overall debt limits, and public debt is buffers remain above regulatory mini- for public and private investment pro- expected to peak at 42 percent of GDP in mums but could be tested as further effects jects. Although Uzbekistan will benefit 2022-23 and stabilize at about 40 percent of the pandemic, the war in Ukraine, and from high global commodity prices of GDP by end-2024. strong credit growth in recent years (gold, copper, and natural gas), an es- These projections remain subject to signif- emerge. To reduce banking dollarization, timated 6 percent of GDP fall in remit- icant further downside revisions depend- the CBU increased minimum reserves for tances will widen the current account ing on the duration of sanctions on Russia, foreign currency deposits from 14 to 18 deficit to 10 percent of GDP in 2022. potential global financial spillovers from percent in August 2021. With foreign investments from Russia US interest rate changes, further The unemployment rate declined to 9.6 expected to fall, FDI inflows will be sub- COVID-19 waves, and the impact of trade percent in 2021 from 10.5 percent in 2020. dued in 2022 and take time to recover. and logistics disruptions to Uzbekistan’s Employment has not yet returned to pre- As a result, the higher current account supply chains. pandemic levels and unemployment re- deficit is expected to be financed by new mains high for women and youth. public debt and the use of reserves. TABLE 2 Uzbekistan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 5.7 1.9 7.4 3.6 5.3 5.5 Private Consumption 5.3 0.1 7.1 0.6 2.9 3.2 Government Consumption 5.7 1.4 1.1 15.8 2.5 4.5 Gross Fixed Capital Investment 38.1 -4.4 5.2 -0.4 7.1 7.2 Exports, Goods and Services 16.2 -20.0 4.8 13.1 13.8 15.1 Imports, Goods and Services 13.3 -15.0 5.8 1.0 8.9 11.1 Real GDP growth, at constant factor prices 5.7 1.9 7.4 3.6 5.3 5.5 Agriculture 3.1 2.9 4.0 3.7 3.6 3.9 Industry 8.3 2.5 8.3 3.9 6.4 6.7 Services 5.6 0.9 9.0 3.3 5.6 5.7 Inflation (Consumer Price Index) 14.5 12.9 10.8 11.9 10.6 9.0 Current Account Balance (% of GDP) -5.8 -5.0 -6.6 -10.2 -7.1 -5.7 Fiscal Balance (% of GDP) -3.9 -4.5 -6.2 -4.0 -2.9 -2.5 Debt (% of GDP) 29.7 39.0 38.1 42.0 42.1 40.3 Primary Balance (% of GDP) -3.4 -3.4 -5.0 -2.8 -1.7 -1.3 GHG emissions growth (mtCO2e) 0.4 -3.3 3.6 2.0 2.8 3.0 Energy related GHG emissions (% of total) 51.1 48.6 49.8 50.2 50.9 51.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 46 Apr 22