BAKU, Azerbaijan, April 14. Russia-Ukraine conflict and the sanctions imposed on Russia brought new uncertainty and negatively affected the prospects for the economy of Uzbekistan, Trend reports via IMF.
Russia is a key trading partner of Uzbekistan and a major source of remittances and financing, including for the energy and mining sectors.
According to the fund, the spillover effects of trade disruptions, rising fuel and food prices, and tightening global financial conditions pose additional obstacles to development. Volatility and uncertainty are expected to remain elevated for some time.
Strong fundamentals, ample reserves, and strong gold prices have enabled the Uzbek authorities to take decisive action to mitigate the socio-economic impact of the pandemic while maintaining stability. Thanks to this, the economic recovery that began in late 2020 gained momentum in 2021, with growth accelerating to 7.4 percent. Pressure from global food and commodity prices pushed up inflation, but relatively tight monetary policy pushed inflation down to 10 percent by the end of 2021.
Given the new adverse factors, the growth of the Uzbek economy is expected to slow to 3-4 percent in 2022, compared to 6 percent previously forecast.
A decline in remittances and financing from Russia, and to a lesser extent a reduction in trade, including due to further disruptions in the supply chain, are projected to lead to lower consumption and investment.
The current account deficit is projected to widen to about 9.5 percent of GDP, with the decline in remittances partially offset by lower imports and higher commodity export earnings. Inflation is expected to remain elevated at 12 percent this year due to spikes in global food and fuel prices.
Forecasts are characterized by unusually high uncertainty, with downside risks predominating. Downward risks are associated, in particular, with a possible further escalation of the conflict and the sanctions regime, as well as with a new outbreak of a pandemic caused by the emergence of new varieties of the virus.
This underscores the need to continue immunization programs to ensure that most of the population of Uzbekistan is vaccinated. Uzbekistan could also be adversely affected by slower growth in other key trading partners, including China, Turkey and Kazakhstan, and further commodity price volatility.
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