BAKU, Azerbaijan, April 5. Fitch Ratings has affirmed Uzbekistan's long-term foreign-currency issuer default rating at 'BB-' with a Stable Outlook,Trend reports via agency's forecast.
According to Fitch,Uzbekistan's ratings balance robust external and fiscal buffers, low government debt and a record of high growth relative to 'BB' rated peers, against high commodity dependence, high inflation and structural weaknesses in terms of low GDP per capita and weak institutional and governance levels relative to peers.
The Russia-Ukraine conflict and sanctions against Russia, where Fitch forecast 8 percent contraction of GDP and 45 percent ruble depreciation against the USD in 2022, will lower Uzbekistan's growth, lead to a higher current account deficit and trigger higher inflation in 2022-2023, as reflected in the Fitch’s revised forecasts. Russia accounted for 70 percent of total migrant remittances, 12 percent of total exports and 21 percent of imports in 2021.
However, Fitch considers that Uzbekistan's robust sovereign balance sheet, improved policy framework, diverse commodity export base including gold, and availability of strong official technical and financial assistance will allow the country to preserve macroeconomic stability, the strength of external and fiscal buffers and progress achieved in the economic reform agenda.
The ratings forecast growth to slow to 3.1 percent, after a strong recovery of 7.4 percent in 2021, reflecting lower remittances negatively impacting private consumption, potential delay of certain investment projects, tighter external financing conditions, weaker currency and higher inflation.
Fitch’s expectation is that fiscal policy and favorable prices for Uzbekistan's commodity exports (gold, copper and gas) will cushion the impact of the shock.
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