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Reforms in real sector of economy to be main drivers of Uzbekistan’s economy in 2021

Uzbekistan Materials 21 January 2021 17:47
Reforms in real sector of economy to be main drivers of Uzbekistan’s economy in 2021

BAKU, Azerbaijan, Jan. 21

By Klavdiya Romakayeva - Trend:

The main drivers of the economy in 2021 and the following years will focus on structural changes and economic reforms in the real sector of the economy aimed at developing competition, improving the investment climate and infrastructure, Trend reports citing the Central Bank of Uzbekistan (CBU).

According to the CBU, taking into account the indicators of the 4Q2020 and the first half of January 2021, macroeconomic conditions are formed according to the baseline forecast of the Central Bank.

CBU reports that fiscal stimulus and the effects of a relative easing of monetary conditions in 2020 will help support economic activity in the first half of 2021 on the demand side. At the same time, real GDP growth in 2021 is projected at 4.5-5.5 percent.

According to estimates, the volume of credit investments in Uzbekistan’s economy in 2021 will be proportional to the growth of nominal GDP in the range of 16-20 percent.

Also, taking into account the invariability of regulated prices and the balance of inflation factors, inflation is expected to further decline to 9.-10 percent by the end of 2021.

It was noted that it takes some time for the full transmission of the previously made decisions to reduce the base rate, as well as for the economy to adapt to the relative easing of monetary conditions.

According to the CBU’s estimates, the current “relatively tight” monetary policy environment is sufficient to maintain the baseline forecast economic growth in 1H2021 and ensure positive real rates (at 3-4 percent) in the money market.

Furthermore, in the coming months, the probability of the prevalence of increasing factors of inflation in Uzbekistan remains low.

At the same time, there are risks associated with the likelihood of one-off inflation factors and inflationary expectations maintaining a high level.

CBU notes that one of these risks in the near future is the rise in food prices. The policy of protectionism, the introduction of restrictive measures (quotas and tariffs) on the export of basic food products by exporters can also lead to higher prices for imports of basic food products.

In this regard, increasing the stability and sustainability of food markets will largely depend on the development and implementation of a comprehensive strategy to ensure food security in the country.

“It will be important to take response measures to ensure the stable supply of the domestic market with the required volume of goods, including by diversifying the geography and reducing the concentration of imports of basic food products,” the message said.

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