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EBRD revises forecasts on economic growth of Uzbekistan

Business Materials 10 May 2018 12:05 (UTC +04:00)

Baku, Azerbaijan, May 10

By Fikret Dolukhanov – Trend:

The European Bank for Reconstruction and Development (EBRD) has revised the forecast for Uzbekistan’s economic growth for 2018, according to the bank’s updated report.

The bank lowered its forecasts for Uzbekistan’s GDP growth from 6.2 percent to 5.1 percent for 2018. Meanwhile, the bank forecasts a 5.3 percent increase in country’s GDP for 2019.

At the same time, the bank noted that general growth in Central Asia picked up from 3.6 percent in 2016 to 4.8 percent in 2017, supported by higher average prices of oil and other commodities, with Uzbekistan continuing implementation of an ambitious program of liberalization reforms.

Economic growth in Uzbekistan eased to 5.3 percent in 2017 from 7.8 percent in 2016, with data suggesting slower growth in construction, industrial output and agriculture. Exports grew by 15 percent year-on-year in US dollar terms in 2017 and remittances from Russia surged by 42.4 percent in US dollars.

Uzbekistan’s external position is strong, with $27 billion in net international reserves in March 2018 and external debt at only around $16 billion (33 percent of GDP). The exchange rate has remained stable at 8,000-8,100 soum per US dollar following the September 2017 devaluation. Average inflation accelerated from 8 percent year-on-year in 2016 to 12.5 percent in 2017, reaching 14.4 percent by end-2017.

The impact of the currency devaluation on inflation has been relatively limited due to the fact that the unofficial exchange rate had already been much weaker than the official one prior to the exchange rate unification. Inflation is expected to remain in low double digits in 2018 and 2019 because of further price liberalization and the resulting adjustment in relative prices.

The central bank loosened monetary policy during the 1H2017 but tightened it again prior to the run-up to the foreign exchange liberalization in September. Data for the 1Q2018 point to a significant re-acceleration in credit growth in early 2018.

Uzbekistan’s consolidated budget deficit is estimated to have remained below 1 percent of GDP in 2017 and is expected to widen only slightly thanks to the unwinding of the government’s housing and infrastructure programs.

Public debt is estimated to total about 25 percent of GDP. The economy is projected to grow by 5.1 percent in 2018 and 5.3 percent in 2019 on the back of increased investment and public spending on infrastructure, as well as export growth. However, the impact of deep structural reforms, including tax and customs reform and the overhauling of the role played by extrabudgetary funds, and changes in statistical methodology and data collection make forecasts subject to significant uncertainty.

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