Central Bank expects inflation slowdown to target 5% in two years

The Central Bank expects to achieve the inflation target of 5% by the end of 2025, according to the regulator's commentary on monetary policy.

The Central Bank calculates that the price growth rate will accelerate slightly in the coming months. Annual inflation could reach 9% by the end of the half-year, returning to last summer's levels, and settle within the 8-9% range by year-end.

The main reason for the price increase will be the expected rise in state-regulated prices. Their share in overall inflation will peak in the second quarter.

This primarily refers to the growth of utilities and energy tariffs, as well as the prices of railway tickets. The cancellation of the zero VAT rate on medicines, medical services, and housing and communal services for the population will also affect inflation.

Apart from that, there remains a high probability of inflationary factors influencing fruit and vegetable prices. In the context of climate change, water shortages, and uncertainty with energy supplies for greenhouses, prices may increase.

Core inflation is expected to rise at the beginning of this year but will subsequently decrease. By the end of the current year, the regulator forecasts its value to be in the 7-8% range, with a sharp reduction to 4% in 2025.

The regulator also counts on a reduction in imported inflation. This should be facilitated by the gradual slowdown of price increases in the economies of Uzbekistan's key trade partners, as well as by reducing pressure on the real exchange rate of the som.

In the past two years, the real income growth of the population has slowed by more than half. If in 2022 there was a significant reduction in income growth from local production amid an increase in monetary transfers, then a year later, production incomes grew while transfers decreased.

For this year, the Central Bank expects a stable overall increase with a slight rise in both categories.