Uzbekistan
Date: 10 May 2012
The event will be held in Tashkent , Uzbekistan , with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
Mr. Bakhodur Eshonov
Center for Economic Research
Country briefing note <download pdf file>
Strong growth momentum maintained
• Uzbekistan continued to be the steadiest economy in the subregion, with its GDP growing by 8.3% in 2011, following growth of 8.5% in 2010 and 8.1% in 2009.
• Growth was supported by a strong performance of the services sector and favourable global prices for the country's main exports, including cotton, gas and gold. Also contributing to the expansion of the economy was increased FDI flows as well as funding from the Fund for Reconstruction and Development of Uzbekistan for investment in infrastructure and the development of the hydrocarbon sector.
• A sharp rise in remittance flows, a reduction in personal income tax, hikes in public-sector wages and social benefits helped sustain private consumption growth.
• Economic growth in Uzbekistan is projected to slow slightly to 8% in 2012. The key downside risk is weak external demand in the euro zone and the Russian Federation , which Uzbekistan is highly dependent on through trade and remittances.
• Volatile commodity prices are also likely to have a negative impact on the domestic economy given its continued high reliance on exports of natural resources.
Inflation remains high
• Consumer price inflation reached a double-digit rate of 13.5% in 2011, up from 9.4% in the previous year.
• While the Government's price controls on food and energy helped limit inflationary pressures, elevated commodity prices and the depreciation of the local currency heightened imported inflation. The gradual withdrawal of subsidies on electricity and hikes in public-sector wages and benefits also exerted upward pressure on inflation.
Revenue growth compensates for increased public expenditure
• Uzbekistan continued to post a small surplus, equivalent to 0.4% of GDP in 2011, as higher revenues stemming from strong economic growth more than compensated for increased infrastructure and social spending and a one percentage point reduction in the profit and personal income tax, which came into effect in 2011.
Growth in trade and remittances support current account surplus
• The current account surplus is estimated to be 7.4% of GDP in 2011, owing to a large trade surplus and increased remittances from the Russian Federation . Favourable global prices for gold, gas and cotton and strong manufacturing exports, especially automotive products, boosted export revenues.
• The central bank continued to allow its currency som to depreciate in an attempt to support exports and boost the country's competitiveness in both the global and regional markets.
High reliance on commodity exports: need further diversification
• The economy of Uzbekistan is highly dependent on commodity exports. Consequently, a sharp fall in external demand or commodity prices would lead to a severe decline in economic activities and, in turn, have a strong impact on economic growth.
• Over the past decade, the country has achieved a significant drop in the share of cotton exports, owing to the government's long-term plan to move the cotton sector away from just growing the crop to producing finished products.
• However, further diversification of the economy is important for achieving higher and sustainable growth as well as greater socio-economic stability.
• Countries with heavy commodity dependence must design and implement policies aimed at reducing their dependency. This is easier to accomplish during the boom years when fiscal and external positions are healthy.
• Progress towards diversification requires strong enforcement of market competition laws as well as relevant investment in infrastructure, which could potentially improve the business environment and contribute to the development of new high value-added export-oriented sectors.
Policy brief: Living with high commodity prices <download pdf file>