IMF Staff Concludes Visit to Uzbekistan
IMF News, November 16, 2022
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- Published: November 16, 2022
Mission summary
- IMF staff team led by Mr. Ron van Rooden met with Uzbekistan authorities during November 7–15, 2022 to discuss economic developments, prospects, and policy priorities.
- The mission is an end-of-mission press release; the views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
- Uzbekistan’s economy is projected to grow by almost 6 percent in 2022.
Macroeconomic outlook and risks
- Growth outlook:
- Uzbekistan’s economy is projected to grow by almost 6 percent in 2022.
- Economic growth in Uzbekistan is projected to slow somewhat in 2023, to just under 5 percent.
- As the authorities continue with sound macro-economic policies and reforms, growth is expected to remain strong in the years ahead, supporting the goal of becoming an upper middle-income country by 2030.
- Inflation and prices:
- Inflation has increased and become more broad-based, reflecting rising prices globally, especially of food and energy.
- Inflation is expected to remain contained at about 12 percent by end-2022.
- Inflation is expected to remain elevated in 2023.
- External and global risks:
- Additional headwinds lie ahead and uncertainty is large.
- Downside risks include a possible further escalation of the war in Ukraine, slower global growth, and deteriorating financial conditions.
- Money transfers, including remittances, more than doubled in 2022 and, together with continued fiscal support and resilient trade, supported activity and growth.
Monetary policy recommendations
- Monetary policy needs to remain firmly focused on reducing inflation.
- The current policy stance appears appropriate to contain price pressures and gradually bring inflation down to the CBU’s medium-term objective.
- Policy transmission remains constrained by:
- a low level of financial intermediation,
- high dollarization,
- government lending programs at preferential interest rates.
- Further guidance:
- Monetary policy may need to be tightened if food and energy price pressures feed more broadly into core inflation, to avoid that inflation expectations become un-anchored.
- Preferential lending programs should be reduced further and replaced by interest rate subsidies for critical activities.
Fiscal policy recommendations
- Fiscal stance and targets:
- The pace of fiscal consolidation was reduced in 2022 to allow for a more than doubling of social assistance.
- The budget deficit is expected to reach 4 percent of GDP in 2022.
- The authorities aim to reduce the deficit to 3 percent of GDP in 2023.
- Policy guidance:
- Fiscal policy should continue to protect the most vulnerable through targeted support.
- Other spending may need to be curtailed further given risks to revenues from the reduction in the VAT rate and lower gold prices.
- Efforts to broaden the tax base by eliminating exemptions and improving compliance should continue.
- There remains scope to further strengthen public investment management and fiscal risk management, including by setting firm rules and limits for public-private partnerships.
Structural reforms and competitiveness
- Reform priorities to shift toward private sector-led growth:
- Continue privatization of state-owned enterprises and state-owned banks; the new privatization law will help ensure transparent and competitive processes.
- Improve corporate governance and transparency in state-owned enterprises and state-owned banks.
- Enhance competition and create a level playing field by opening internal markets to private firms, eliminating privileges for state-owned enterprises, adopting the new competition law, and ensuring independence and adequate powers of the anti-monopoly committee.
- Expand digitalization of government services, including tax and customs administration, to ease business operations and reduce scope for corruption.
- Strengthen beneficial ownership requirements, notably for large construction and infrastructure projects, to avoid capture by vested interests.
- Improve factor markets (labor, land, energy, water, finance) to bolster productivity:
- The new labor code will help facilitate job creation; improvements in vocational and higher education are urgently needed to address large skill mismatches.
- Accelerate land reform, including in agriculture, to provide secure and tradable land rights.
- Raise energy and water tariffs gradually to cost recovery and then to market levels, accompanied by adequate support for vulnerable households.
- Continue efforts to reduce the large role of state-owned banks in the banking system and pursue capital market reforms to enhance financial intermediation and access to finance.
- Increase trade integration and regional cooperation:
- Accelerate WTO accession negotiations.
- Increase cooperation with neighboring countries to improve and create new transport routes and attract businesses seeking to relocate.
Key statistics — Uzbekistan: Selected Economic Indicators, 2019-2023 (Est./Proj. as shown)
- Real GDP growth (percent change): 2019: 5.7; 2020: 1.9; 2021: 7.4; 2022 Est.: 5.8; 2023 Proj.: 4.8
- GDP per capita (in U.S. dollars): 2019: 1,801; 2020: 1,766; 2021: 2,002; 2022 Est.: 2,254; 2023 Proj.: 2,504
- Population (in millions): 2019: 33.3; 2020: 33.9; 2021: 34.6; 2022 Est.: 35.3; 2023 Proj.: 36.0
- Consumer price inflation (end of period, Percent change): 2019: 15.2; 2020: 11.2; 2021: 10.0; 2022 Est.: 12.4; 2023 Proj.: 11.7
- GDP deflator (Percent change): 2019: 17.9; 2020: 11.6; 2021: 13.6; 2022 Est.: 13.3; 2023 Proj.: 12.6
- Current account balance (Percent of GDP): 2019: -5.6; 2020: -5.0; 2021: -7.0; 2022 Est.: -1.3; 2023 Proj.: -4.7
- External debt (Percent of GDP): 2019: 42.5; 2020: 57.5; 2021: 57.8; 2022 Est.: 61.2; 2023 Proj.: 59.0
- Exchange rate (in sums per U.S. dollar; eop): 2019: 9,508; 2020: 10,477; 2021: 10,838; 2022: …
- Real effective exchange rate (ave, 2015 =100, decline = depreciation): 2019: 65.5; 2020: 65.3; 2021: (blank)
- Consolidated budget revenues (Percent of GDP): 2019: 27.7; 2020: 26.6; 2021: 27.8; 2022 Est.: 30.9; 2023 Proj.: 28.2
- Consolidated budget expenditures (Percent of GDP): 2019: 31.4; 2020: 31.0; 2021: 33.4; 2022 Est.: 35.0; 2023 Proj.: 31.2
- Consolidated budget balance (Percent of GDP): 2019: -3.8; 2020: -4.3; 2021: -4.1; 2022 Est.: -3.0
- Adjusted revenues 1/ (Percent of GDP): 2019: 27.0; 2020: 25.6; 2021: 26.1; 2022 Est.: 29.7; 2023 Proj.: 27.1
- Adjusted expenditures 1/ (Percent of GDP): 2019: 27.3; 2020: 28.9; 2021: 30.6; 2022 Est.: 33.7; 2023 Proj.: 30.0
- Adjusted fiscal balance (Percent of GDP): 2019: -0.3; 2020: -3.3; 2021: -4.6; 2022 Est.: -4.0; 2023 Proj.: -2.8
- Policy-based lending (Percent of GDP): 2019: 3.5; 2020: 1.1; 2021: 1.5; 2022 Est.: 0.2
- Overall fiscal balance (Percent of GDP): 2019: -4.4; 2020: -6.1; 2021: -4.2; 2022 Est.: -3.1
- Public debt (Percent of GDP): 2019: 28.4; 2020: 37.4; 2021: 35.4; 2022 Est.: 34.5
- Reserve money (Percent change): 2019: 17.8; 2020: 15.4; 2021: 28.3; 2022 Est.: 18.8
- Broad money (Percent change): 2019: 13.8; 2020: 30.3; 2021: 36.4; 2022 Est.: 18.1
- Credit to the economy (Percent change): 2019: 23.8; 2020: 34.4; 2021: 18.4; 2022 Est.: 19.7; 2023 Proj.: 17.0
- Sources: Country authorities; and IMF staff estimates.
- 1/ IMF staff adjusts budget revenues and expenditures for financing operations, such as equity injections, policy lending, and privatization of state enterprises. The overall fiscal balance is more negative than the consolidated budget balance as it excludes privatization receipts.
Press Release No. 22/385; November 16, 2022 — IMF Staff statement at the end of mission.