17 March 2023

Central Bank of Uzbekistan expects lower inflation

“Gazeta.Uz” reports that according to the Central Bank of Uzbekistan, the annual inflation rate has slowed down, and therefore the likelihood of its significant decline in the second quarter increases. The January frosts affected trade and industry, but the Central Bank expects recovery of sectoral indicators by the end of the first half of the year.

In January-February, the annual inflation rate slowed down to 12.2%, and the likelihood of its significant decline in the next quarter is increasing, according to the message of the Central Bank following the meeting of the Board on March 16.

“Observation results show that in the first two weeks of March, the prices of basic food products in consumer markets relatively stabilized, and switched to a declining trend after an increase in January,” the Central Bank noted.

The core inflation indicator, which excludes seasonality and administratively set prices, has since the beginning of the year changed the upward trend observed since the second quarter of last year to a downward one, slowing down from 13.8% in December to 13.3% in January, and 13 .2% in February, the regulator said.

According to the results of the February survey, inflation expectations for the next 12 months show a decrease compared to January, which, together with the dynamics of the core inflation indicator, creates conditions for price stabilization in the coming months.

In external economic conditions, some risks and uncertainties remain. Global inflation continued to slow down in February, mainly due to lower energy and food prices.

“Along with the tough positions of the leading central banks to reduce inflation, the increased demand for safe assets against the background of the observed situation in the international banking sector increases volatility in the financial and commodity markets,” the Central Bank noted.

Tough conditions in the international financial markets and the devaluation of the currencies of some trading partners, on the one hand, make it difficult to attract external resources to support domestic economic activity, and on the other hand, widen the imbalance in foreign exchange flows, analysts emphasized.

Prices on world food markets and price expectations create the basis for a more favorable conjuncture for the import of goods into the country. “This, in turn, serves as a deterrent to imported inflation,” the report says.

“According to preliminary data, the impact of short-term risks on domestic economic conditions has partially manifested itself. According to the results of January, there was a slowdown in retail trade, industrial production and construction work. The growth rate of the service sector slowed down compared to the same period last year, but remained high compared to other sectors,” the Central Bank said. At the same time, the regulator notes that given the temporary nature of shocks and timely measures taken, “by the end of the first half of the year, economic activity is expected to stabilize and industry indicators to recover.”

According to the Central Bank, positive real interest rates in the economy ensured higher annual growth rates of time deposits in the national currency. At the same time, the growth rate of loans in the national currency also accelerated compared to the same period last year, which the regulator considers as a positive incentive for the recovery of economic activity.

The Central Bank said that its further actions will be aimed at ensuring a balance between the formation of inflation in the forecast corridor, its achievement of its medium-term goal and the maintenance of economic activity.

The next meeting of the Board of the Central Bank to consider the main rate is scheduled for April 27.