Uzbekistan Economic Forecast

Economic growth slowed in Q1, falling to 5.5% from 5.7% in Q4, due to slower expansions in agriculture and industrial output, as well as softer services growth. Turning to Q2, growth appears to be accelerating from Q1 levels. Domestically, construction activity, industrial production and services activity—particularly retail trade—rose at a quicker pace in April than in Q1. On the external front, exports improved and import growth decelerated. More structurally, the number of operating enterprises continued to grow in the month, hinting at an increasingly dynamic economic environment. Meanwhile, in politics, the country will hold a snap presidential election on 9 July following April’s approval via referendum of a package of constitutional reforms. The incumbent president is projected to win—further concentrating power—which would bode poorly for additional structural reforms.

Inflation eased to 11.0% in April (March: 11.7%), remaining above the Central Bank’s 5.0% target. The Bank lowered interest rates by 100 basis points to 14.00% on 16 March. Later this year, inflation should ease slightly from current levels but remain above the Bank’s target. Commodity price swings, currency volatility and a poor harvest are risks.