Central Bank of Uzbekistan assessed impact of pandemic on economy 

According to preliminary estimates of the Central Bank of Uzbekistan, in 2020, the country’s gross domestic product (GDP) growth rate is expected to slow down to 1.5-2.5 percent in the context of the coronavirus pandemic.

The sectors of tourism, hotel services, international transportation, entertainment, sports and exclusive services are forecast to experience the greatest slowdown.

According to the Central Bank, the increase in gold prices and in exports of horticultural products will have a positive impact on the revenues of the State budget and businesses, and thus, to some extent, the effects of the decline in tax revenues will be offset.

Experts of the regulator believe that the establishment of the Anti-Crisis Fund and its replenishment, including through the mobilization of resources from international financial institutions, and the accumulation of funds in special funds and their subsequent channeling to assist part of the population that lost profits during the quarantine period, will help mitigate the adverse effects of the pandemic.

Declining external demand and falling commodity prices in world markets will affect the downward trend in export transactions. For example, the decline in exports is estimated to be between 11 and 12 percent compared to 2019. Export declines are mainly expected for energy, non-ferrous metals and products, and tourism services. However, the increase in gold prices is expected to have some offsetting impact.

In addition, declining domestic investment and consumer demand and short-term disruption in global supply chains will reduce the demand for imports of goods and services to 10 percent. Imports of machinery and equipment, construction materials, ferrous metals and their products and services are also expected to decrease.

As a result, the current account deficit is estimated to increase from 7.2 percent of GDP in 2019 to 9.5-9.8 percent of GDP in 2020. Financing this deficit by ensuring sufficient foreign exchange earnings (external credit, foreign direct investment or the use of international reserves) is essential to maintaining macroeconomic stability in the country.

“The above factors will have a significant impact on fiscal revenues and consequently on the overall fiscal balance. By the end of 2020, the general fiscal deficit is expected to increase to 3.5-4.5 percent of GDP,” the regulator noted. 

In addition, the basic inflation projection by the end of 2020 has decreased by 1 percentage point from the original estimates (12-13, 5 percent) to around 11-12.5 percent.

During January-March, Uzbekistan’s foreign trade declined by $924.1 million to $8.1 billion. Thus, the decline in foreign trade was mainly due to trade contractions with China (by 17.5 percent) in the first three months of 2020, which accounted for 16.8 percent of total foreign trade, with Kazakhstan (by 13.7 percent) and South Korea (by 22.1 percent).

In the first quarter of 2020, exports fell by 10.9 percent to $3.4 billion. This was due to a decline in sales of natural gas (by 29.6 percent), cotton fiber (by 46.9 percent), non-ferrous and ferrous metals (by 19 percent and 20.8 percent, respectively), and other products.
 
However, the rise in gold prices helped to sustain the overall foreign trade balance and reduce its deficit from $1.5 billion to $1.4 billion in the first quarter of 2020.