BAKU, Azerbaijan, May 1
By Ilkin Seyfaddini – Trend:
The Central Bank of Uzbekistan expects the country's gross domestic product (GDP) growth rate to slow down to 1.5-2.5 percent in 2020, amid coronavirus pandemic, Trend reports citing the Central Bank.
The most significant slowdown is projected in the sectors of tourism, hotel business, international transportation, entertainment, sports and exclusive services, the report says.
According to the Central Bank, the rise in gold prices and increased exports of fruit and vegetable products will have a positive impact on state budget revenues and business entities, and to a certain extent offset the effects of reduced tax revenues.
Creation of the anti-crisis fund and its replenishment, including through the attraction of funds from international financial institutions, as well as the accumulation of funds in special funds with their further direction to provide assistance to the part of the population that lost their income during the quarantine period, will contribute to smoothing the negative effects of the pandemic, according to experts of the Central Bank.
Decrease in external demand and falling prices for raw materials in the world markets will affect the downward trend in export operations. Thus, the decline in export volumes is estimated at 11-12 percent compared to 2019.
Exports are expected to fall mainly in energy, non-ferrous metals and their products, as well as in tourism services. However, the increase in gold prices will, to some extent, have a compensatory effect, said the bank.
In addition, declining domestic investment and consumer demand and a short-term disruption to global supply chains will reduce import demand for goods and services to 10 percent. In general, imports of machinery and equipment, construction materials, ferrous metals and their products and services are expected to decline.
As a result, the current account deficit is estimated to increase from 7.2 percent of GDP in 2019 to 9.5-9.8 percent of GDP in 2020. Financing this deficit by ensuring sufficient foreign exchange earnings (attracting foreign loans, foreign direct investment or using gold and foreign exchange reserves) is important for maintaining macroeconomic stability in the country, the bank said.
"The above factors will have a significant impact on budget revenues and, consequently, on the overall fiscal balance. The general fiscal deficit is expected to increase to 3.5-4.5 percent of GDP by the end of 2020," said the statement.
In addition, the basic inflation forecast by the end of 2020 has been revised downward by 1 p.p. relative to the initial estimates (12-13.5 percent) and is 11-12.5 percent.
In the period from January through March, the volume of Uzbekistan's foreign trade decreased by $924.1 million, to $8.1 billion. Thus, the decline in foreign trade activity is mainly explained by the reduction of turnover with China (by 17.5 percent) in the first three months of 2020, which accounts for 16.8 percent of all foreign trade, Kazakhstan (by 13.7 percent) and South Korea (by 22.1 percent).
In the first quarter of 2020, exports fell by 10.9 percent, to $3.4 billion, which was caused by a drop in sales of natural gas (by 29.6 percent), cotton fiber (by 46.9 percent), non-ferrous and ferrous metals (by 19 percent and 20.8 percent, respectively) and other goods.
However, higher gold prices helped maintain the overall foreign trade balance and reduce the deficit from $1.5 billion to $1.4 billion in the first quarter of 2020.
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