BAKU, Azerbaijan, May 13
By Ilkin Seyfaddini - Trend:
European Bank for Reconstruction and Development (EBRD) presented a revised forecast of Uzbekistan's economic growth for 2020-2021 in its new Regional Economic Prospects in the EBRD Regions review, Trend reports citing the bank's report.
"The outbreak of the coronavirus and the subsequent collapse of commodity prices have put Central Asian economies under immense pressure. Suffering from limited economic diversification and high dependence on remittances, the region will be very strongly affected via slowing global demand for oil, gas, metals and other commodities as well as trade and travel restrictions put in place to contain the spread of CIVID-19. On the demand side, exports, private consumption and investment will take a major hit as a result of internal containment measures and worsening external conditions – including lower demand for seasonal workers," the bank said.
According to the bank, many businesses, in particular, small and medium-sized enterprises (SMEs) in the services and hospitality sectors, will not be able to maintain full-scale operations due to internal lockdown measures, border closures and disruption of trade and international supply linkages. At the macro level, all countries in the region are experiencing pressures on their balance of payments, fiscal accounts and currencies. Oil and gas exporters, such as Uzbekistan, though able to rely on significant fiscal buffers and international reserves to cushion the negative impact of virus containment measures on the economy, will also be stressed as a result of a dramatic decline in the demand for energy resources.
"In 2019, Uzbekistan’s GDP grew by 5.6 percent, slightly accelerating from 5.4 percent in 2018. In the first quarter of 2020, the economy expanded by 4.1 per cent but is likely to contract in the second quarter as the impact of virus containment measures (lasting for at least two months) kicks in. Exports declined by 11 percent year-on-year in the first three months of 2020, despite being much more diversified in terms of products and markets compared to other countries in Central Asia," the bank said.
According to the bank, commodity exports constituted about 50 percent of Uzbekistan’s total exports in 2019, with gold, which accounts for more than a half of those, providing a natural hedge in turbulent times. China was Uzbekistan’s largest export market in 2019, but its share in total exports was only 14 percent (mostly gas). Rapid expansion in credit to the private sector (up 26 percent year-on-year in December 2019) is a source of vulnerability given higher probability of businesses defaulting at a time of a major slowdown in the economy, with negative implications for the stability of the banking system.
"Remittances from Russia (accounting for eight percent of GDP) are expected to shrink affecting the most vulnerable parts of the population. In addition, the tourism and hospitality sector (about six percent of GDP), will be among the hardest hit by coronavirus-related disruptions," the bank said.
According to the bank, GDP of Uzbekistan is still expected to grow in 2020, albeit at a modest rate of 1.5 percent. Much stronger growth performance, of 6.5 percent, is expected in 2021, reflecting a recovery in both exports and domestic demand.