The World Bank has published the summer 2019 edition of the Uzbekistan Economic Update, which outlines the economic situation in the country (2018–first quarter of 2019) and the medium-term development prospects.
The report notes that Uzbekistan is implementing ambitious market-oriented economic reforms. Starting in September 2017, the government unified the exchange rate, liberalized the foreign exchange market, initiated price and trade liberalization and, since January 2019, has made significant cuts to tax rates for both firms and individuals.
The country has eliminated the need for entry visas to promote tourism and business, and renewed its commitment to join the World Trade Organization (WTO).
The government has expanded social safety net coverage and substantially improved the availability of economic statistics.
A surge in investment and a pickup in consumption boosted real GDP growth from 4.5% in 2017 to 5.1% in 2018, and further to 5.3% year-on-year in the first quarter of 2019.
Growth is projected to rise to 6% in 2021, supported by market reforms to address production bottlenecks and liberalize the economy.
Twelve-month inflation peaked at 20% in early 2018, before declining to 14.3% by December, resulting in an annual average rate of 17.5% for 2018. The consumer price inflation eased further to 13.7% year-on-year by April 2019.
Inflationary pressures are likely to persist in 2019–20 due to: (i) the continued liberalization of administrative prices, including for energy and water; (ii) increased policy lending via state-owned banks to support investment growth, and (iii) public wage increases. Tightening of monetary and credit policies will be required for inflation to moderate by 2021.
Imports of machinery and equipment to modernize production, and imports of consumer goods to meet pent-up consumer demand, widened the current account deficit in 2018. The deficit is likely to narrow over the medium-term, but will remain large.
The external deficit is likely to be financed by increased donor support and a gradual increase in inflows of foreign direct investment (FDI).
External buffers are likely to remain comfortable in the medium-term, with foreign exchange reserves above 13 months of import cover.
Gross external debt is projected to decline modestly to about 39% of GDP by 2020.
The government budget, excluding policy-based lending, is forecast to shift from a surplus to a small deficit of about 1% of GDP over the medium-term, following a significant reduction in excise, income, and payroll tax rates, and increased public spending on investment, pensions, and low-income allowances.
Public debt is likely to increase to about 25% of GDP in 2020. Steady growth of remittance inflows and robust economic growth are expected to contribute to a modest reduction in the poverty rate.
