IMF experts list possible risks for Uzbekistan’s economy 

The IMF announced the official statement of the organization's mission on the results of the discussions held in Tashkent with the authorities of Uzbekistan as part of the 2024 consultations.

Current status

According to the statement, the rate of growth of Uzbekistan’s economy remains high. Although the volume of remittances has returned to the trend of the period until 2022, the implementation of stimulatory fiscal policies, a sharp increase in fixed capital investment and the activation of private consumption served to increase GDP by 6% in real terms in 2023. In the first quarter of 2024, the growth rate remained high and amounted to 6.2% on an annual basis.

Steady growth in real incomes and measures to expand the scope of the social protection system from 2020 helped to reduce the poverty rate from 17% in 2021 to 11% in 2023. Headline inflation fell from 12.3% at the end of 2022 to 8 percent in March 2024 due to a relatively high real base rate and lower global food and energy prices.

Rapid growth of machinery and equipment imports (some of them are temporary), decrease in remittances compared to 2022, the higher impact of factors such as the increase in interest payments on foreign debts and the repatriation of profits of enterprises with foreign shares compared to gold exports caused the current account deficit of the balance of payments to increase from 3.5% of GDP in 2020 to 8.6% in 2023. International stocks, although reduced to $1.2 billion in 2023, remain high and amounted to about 9 months of imports at the end of March 2024.

Prospects

“Overall, the outlook is positive, but internal and external risks remain. The determined efforts of the country’s official agencies to implement reforms, especially in the direction of energy, privatization and reform of state-owned enterprises, helped to improve the prospects of economic development. Real GDP growth is high and is expected to reach 5.4% in 2024 and increase to 5.5% in 2025 due to sustained growth in domestic demand,” the statement said.

It is also noted that the continuation of fiscal adjustments (reduction of the fiscal deficit), the balancing of the growth of bank loans and the reduction of temporary factors observed in imports in 2023 will optimize the growth of imports. This will lead to a decrease in the current account deficit in the current and next years.

According to forecasts, inflation will increase slightly by the end of 2024 due to the increase in energy prices, but the continuation of strict macroeconomic and macroprudential policies and structural reforms will lead to a subsequent decrease in inflation to the target level set by the Central Bank of Uzbekistan.

Risks

The IMF experts cited the geo-economic consequences of the escalation of Russia’s war in Ukraine, the volatility of commodity prices, and the sharp decline in the growth rate of the world economy as high uncertainties in the external conditions for Uzbekistan.

Domestic risks include slower-than-planned fiscal consolidation, weakening bank balance sheets, and the emergence of contingent liabilities for state-owned banks, state-owned enterprises, and public-private partnership (PPP) deals. Accelerating structural reforms, income and capital inflows, and rising gold prices were cited as positive factors.