09 July 2021

J.P. Morgan predicts record economic growth in Uzbekistan

On June 21, 2021, the investment bank “J. P. Morgan “published an analytical report” Uzbekistan: Soum’er Solstice” (“Sunrise of Uzbekistan as the Sun”), dedicated to the Republic of Uzbekistan.

According to him, over the past 20 years, Uzbekistan has become one of the few countries that have been able to achieve high and stable growth rates among the countries of Central Asia, Eastern Europe, the Middle East and Africa (SEEMEA).

In particular, over the past decade, the republic’s economy has grown by an average of 6% per year, thereby winning the”interest ” of many countries.

An ambitious reform plan will ensure the same or even higher economic growth in the future as in recent years. “According to J. P. Morgan, in recent years, Uzbekistan has achieved the pace of reforms that will contribute to increasing the country’s economic growth potential.

At the same time, Uzbekistan is on the verge of such reforms as the liberalization of markets, the reduction of the state’s share in the economy through large-scale privatization. The support of international financial institutions is widely used in this.

Focusing on the reform of state-owned enterprises, J. P. Morgan argues that privatization brings economic benefits, but it is not immune from risks. An example is the experience of the Commonwealth of Independent States in the 1990s.

In this regard, the importance of how the Government of Uzbekistan privatizes state-owned enterprises is emphasized.

According to the report, Uzbekistan in 2020, despite the economic crisis, was able to ensure growth of 1.6 percent. At the same time, the economy of Uzbekistan will grow by 8.1 percent in 2021, by 6.3 percent in 2022 (“The forecast of J. P. Morgan is higher than the forecasts of the IMF and other international financial organizations“).

The report says that economic growth in 2021 will mainly contribute to the construction and industrial sectors.

“J. P. Morgan noted that Uzbekistan uses fiscal policy as the main tool for managing the economy. The government adopted a conservative fiscal policy in 2020 (the total fiscal deficit was 4.4% of GDP instead of the previously projected 7% of GDP).

The report notes that although the public debt will grow rapidly after 2016, the budget legislation has established the highest level of public debt (60 percent of GDP), and the probability that the public debt will reach 60 percent .

The main reason for the growing current account deficit is measures aimed at supporting economic growth, as well as ” opening up to the world” Uzbekistan.

According to J. P. Morgan forecasts, the price of gold may fall to $ 1,350 by 2022. In this regard, it is projected that the current account deficit of Uzbekistan in 2021 will amount to 4.5 percent of GDP, in 2022-8.5 percent of GDP.

P. Morgan notes that the prices of Uzbekistan’s sovereign international bonds reflect an improvement in the macroeconomic situation. In particular, the ongoing structural reforms have a positive effect on the “appetite”of investors.

Nevertheless, the scaling of the domestic capital market, the need to extend the yield curve and the existing restrictions for non-residents were also noted, emphasizing that the domestic capital market is expected to change from 2022.

Decree of the President of the Republic of Uzbekistan No. UP-6207 dated April 13, 2021 “On measures for the further development of the capital market” approved the corresponding action plan for the development of the capital market, including the government securities market.