Economic situation in Uzbekistan
According to the conclusions of the report “Overview of the Economics of the Europe and Central Asia Region”, published by the World Bank on April 6 this year. In 2022, Uzbekistan’s GDP grew by 5.7% due to the growth of remittances, consumption and exports.
Non-gold exports grew by 21% (in US dollars) in 2022, including exports of textiles, non-ferrous metals, fertilizers and food products, largely due to strong growth in exports to Russia (up 52%).
Exports of services, mainly in the field of transport and tourism, increased by 53%. This reflects a threefold increase in the number of tourists or emigrants from Russia, as well as an increase in the number of tourists from Kazakhstan, Kyrgyzstan and Tajikistan.
In 2022, remittances doubled as a percentage of GDP, reaching 18.9%. This is due to the strengthening of the Russian ruble and an increase in the influx of migrants. Some of these financial inflows reflect an increase in private remittances from Russians and Russian companies that moved to Uzbekistan following Russia’s invasion of Ukraine.
The budget deficit decreased from 6.1% of GDP in 2021 to 4.2% in 2022 due to higher state budget revenues. By the end of last year, the gold and foreign exchange reserves of Uzbekistan amounted to 35.8 billion US dollars. These resources are enough to cover import costs for 14 months.
Higher costs for food, fuel and transportation pushed inflation up to 12.3% in December. The national currency depreciated nominally by 3.8% against the US dollar in 2022.
Unemployment has fallen to pre-COVID-19 levels from 9.6% in 2021 to 8.8% in 2022. Unemployment is still high among youth and women, and in underdeveloped regions. The poverty rate (using the national poverty line) decreased from 17% in 2021 to 14% in 2022, which is explained by higher incomes of the population, including from remittances from labor migrants.
Forecasts for the development of the economy of Uzbekistan
In Uzbekistan, economic growth is expected to reach 5.1% in 2023 (the highest growth in the Europe and Central Asia region currently projected) and gradually accelerate over the medium term. The war in Ukraine and the difficulties with transport logistics associated with the sanctions imposed on Russia are expected to further contribute to high food and energy prices and reduce private consumption.
Private investment and trade are expected to pick up and remittances to Uzbekistan are expected to stabilize from their peak in 2022. A projected economic recovery in China could increase demand for textile and food exports from Uzbekistan.
Higher earnings from gold and copper exports, as well as a slowdown in public investment, will lead to a reduction in the budget deficit to 3.3% of GDP in 2023.
The government is expected to adhere to restrictions on external borrowing, which will lead to a gradual reduction in public debt and total external debt to 32% and 55% of GDP, respectively, by 2025.
Further growth and expansion of social protection programs will contribute to the reduction of poverty in the country. The poverty rate is projected to drop to 12% in 2023.
Downside risks to Uzbekistan’s economic growth outlook include a possible deeper contraction of the Russian economy, as well as tighter conditions in global financial markets.
Positive trends for the national economy include a possible increase in global prices for gold, natural gas and copper, as well as higher productivity growth in the country, which may be supported by ongoing structural reforms.