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WB forecasts Uzbekistan's economy to grow by 5.6% in 2019

Business Materials 9 October 2019 11:29 (UTC +04:00)

Baku, Azerbaijan, Oct. 9

By Fakhri Vakilov - Trend:

Uzbekistan’s GDP growth is expected to remain at around 5.6 percent in 2019–20 before increasing to 6 percent in 2021 as market reforms open new sources of export-led growth, address production bottlenecks, and ease regulatory constraints, Trend reports citing World Bank’s report.

Annual inflation is forecast to increase by about one percentage point in 2019 following increases in energy prices in August 2019 (18.8 percent for natural gas, 18 percent for electricity, and 12.5 percent for gasoline). Inflationary pressures are likely to persist in 2019–20, due to further price reforms and wage increases, but should decline over the medium term, read the message.

The current account deficit is expected to moderate from its 2018 peak but remain at 5-6 percent of GDP in 2020–21 on account of sustained heavy machinery and equipment imports.

"The shortfall is expected to be financed by a gradual increase in FDI and sustained donor inflows. Foreign exchange reserves stood at $27.7 billion in August 2019 (the equivalent of 12.4 months of import cover); external buffers will remain comfortable over the medium term. Gross external debt is expected to decline slightly by 2020 to about 34 percent of GDP," read the message.

World Bank reported that the prospect of turbulent global economic conditions is the main risk to Uzbekistan’s economic outlook. The country is especially vulnerable because its main trading partners face particularly heightened external risks.

These risks are mitigated by a comfortable level of foreign exchange reserves and low external public debt. Domestic risks emanate from the high rate of credit growth that continues to undermine the transmission of monetary policy and heighten the potential for financial sector instability, read the message.

The complexity of the next phase of structural reforms to tackle difficult issues such as SOEs, the banking sector, agriculture, and land reforms also heighten domestic risks.

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