Fitch affirms Uzbekistan at 'BB-'; Outlook Stable

Business Materials 13 May 2019 14:21 (UTC +04:00)

Baku, Azerbaijan, May 13

By Fakhri Vakilov - Trend:

The international rating agency Fitch Ratings confirmed the long-term credit rating of Uzbekistan in foreign and national currency at BB- (risky liabilities with speculative traits); the rating outlook is stable, Trend reports with reference to the rating agency.

Fitch analysts state that the ratings of Uzbekistan reflect a good sovereign balance, low public debt and a history of high growth compared with countries with comparable ratings.

On the other hand, the rating reflects a significant dependence on the commodity sector, high inflation and structural deficiencies in terms of low GDP per capita, and weak levels of the institutional environment and management quality relative to issuers with comparable ratings.

Fitch notes that the Uzbek authorities remain committed to greater exchange rate flexibility and lower inflation after liberalizing the foreign exchange market in September 2017.

Fitch expects inflation in 2019 to average 15.2 percent, down from 17.9 percent in 2018, and slow to 13.5 percent in 2020, which is significantly higher than the projected median of 4 percent for the rating category "BB”.

Fitch forecasts demonstrate that the growth of the country's economy will reach 5 percent in 2019 and increase to 5.5 percent in 2020, outpacing the forecasted growth for the current median of the BB rating category.

Uzbekistan’s dependence on the commodity sector (60 percent of exports of goods and 37 percent of budget revenues) is higher than that of competitors, and structural credit deficiencies are expressed in low GDP per capita and weaker indicators of management quality.

Despite the country's strong political commitment to a reform program, Fitch believes that delaying its benefits in terms of higher growth, increased private investment, and job creation combined with higher-than-expected social spending could lead to "reform fatigue”, although it would not affect social stability.

Fitch for the first time assigned Uzbekistan a long-term credit rating of BB- in December 2018.


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