Republic of Uzbekistan
The Federation of Euro-Asian Stock Exchanges
Economic Development and Outlook
88 89
In Uzbekistan, GDP growth slowed sharply from 5.8 percent in 2019 to 1.6 percent in 2020 due to COVID-19–related lockdowns and trade disruptions. However, positive growth was supported by a robust agriculture output and substantial anti-crisis measures that boosted health spending and supported households and firms.
The unemployment rate rose sharply from 9 percent in 2019 to 11.1 percent in September 2020. The poverty rate rose to 9 percent as the pandemic led to job losses, income reductions, and declining remittances. A large expansion of social assistance provided some relief to affected households.
The current account deficit narrowed to 5.2 percent of GDP in 2020 (from 5.7 percent in 2019). Exports declined by 15 percent, and imports by 17 percent. Lower revenues and higher spending (a fiscal stimulus package of 2.5 percent of GDP) widened the overall fiscal deficit to 4.4 percent of GDP in 2020 (from 3.9 percent in 2019). Higher borrowing to finance the deficit increased public debt to 37.9 percent of GDP in 2020.
As annual inflation slowed to 11 percent in December 2020 (from 15.2 percent a year earlier), the Central Bank of Uzbekistan reduced its policy rate from 16 to 14 percent. Credit growth in 2020 slowed to 34 percent (from 52 percent in 2019). Firms and households received some loan repayment deferrals during the year.
The banking sector’s capital adequacy ratio fell to 18.4 percent in November 2020 (from 23.5 percent at end-2019). Nonperforming loans tripled to 4.5 percent in 2020. Nevertheless, Uzbekistan’s financial system remains sufficiently capitalized to absorb potential credit shocks.
GDP growth is projected to recover to 4.8 percent in 2021. However, this forecast is subject to uncertainty surrounding the global recovery and the potential pace of the country’s COVID-19 vaccination campaign. A gradual resumption of trade and investment flows, bountiful agricultural harvest, recovery in remittances, and widespread vaccine distribution should support the recovery and spur further reductions in poverty and unemployment. Stronger GDP growth of 5.5 percent is projected in 2022 as vaccination efforts accelerate and global disruptions ease further.
The current account deficit is projected to widen to 5.5 percent of GDP in 2021 as capital imports for large investment projects recover. Although foreign direct investment is expected to partially recover from its decline in 2020, public and private borrowing are anticipated to continue financing most of the deficit. Lower budget revenues, vaccine purchases, expanding social support, and increased lending to SOEs are expected to contribute to a wider overall fiscal deficit of 5.4 percent of GDP in 2021. This deficit will be financed by increased public borrowing.
Uzbekistan’s public debt is projected to reach 42 percent of GDP in 2021 and stabilize at about 45 percent over the medium term. As conditions for households and firms improve, a gradual withdrawal of anti-crisis measures will reduce the deficit over the medium term.