Fitch predicts a slowdown in Uzbekistan’s economy due to coronavirus effect

The economy of Uzbekistan in the near future may face challenges, Spot writes with reference to the review of Fitch Solutions.

Analysts at Fitch Solutions believe that in 2020, the real growth of the economy of Uzbekistan will slow down to 5.4% (in 2019 it was forecasted to be 5.6%).

The reason is external constraints, including the outbreak of coronavirus in Wuhan, which poses significant risks to China’s growth prospects, especially in terms of trade and import demand. Meanwhile, China accounts for the largest share of Uzbekistan’s exports.

“We predict that the net export contribution will decline from the forecasted -0.5 percentage points (p.p.) in 2019 to -1.3 p.p. in 2020,” the report says.

Economic instability, operational difficulties and imbalances are also mentioned as potential risks for the coming years.

Increasing inflationary pressures as a result of devaluation of the Uzbek soum and infrastructure bottlenecks can lead to an increasingly unstable economic background, analysts say.

“We already predict a slowdown due to weaker external demand, and since Uzbekistan is linked to the global economy by trade and investment, it may face a sharp economic decline,” Fitch Solutions said.

In addition, there are still operational problems in Uzbekistan, and the authorities need to ensure that nepotism and poor transport infrastructure are taken into account as part of reform plans aimed at boosting foreign investment.

Analysts warn that opening up to foreign financial flows carries the risk of speculation, over-investment and an increase in the debt burden.

It is also noted that the country’s reserves cover external financing needs.