Uzbekistan flag Uzbekistan: Economic and Political Overview

The economic context of Uzbekistan

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Uzbekistan is implementing ambitious market-oriented economic reforms, which had been positively impacting the economy before 2020. However, in 2020, the country recorded its worst economic performance in over two decades mainly due to the impacts of the COVID-19 pandemic (such as weak domestic demand and private consumption, as well as a decline in tourism and in remittances from Uzbeks abroad). Still, GDP growth remained positive at 1.7% before jumping again at +6.1% in 2021. It is expected to stabilise at this high level in 2022 (5.4%) and 2023 (5.5%), subject to the post-pandemic global economic recovery, conclusion of the market reforms opening new prospects for export-led growth and addressing production bottlenecks and regulatory constraints.The rebound in remittances and the increase in social spending are expected to continue boosting domestic demand in 2022. Moreover, abundant and varied natural resources, low public debt, solid foreign exchange reserves, aggressive investment programmes, a growing labour force, and a strategic geographic position between China and Europe further factor into Uzbekistan's looming economic development.

According to the IMF, government debt grew to an estimated 36.4% of GDP in 2020 and 38.9% in 2021, and is expected to rise again in 2022 (41%) and stabilise in 2023 (40.5). Periodic price increases for utilities kept inflation high in 2020 (12.9%) and 2021 (11%) and the recovery in domestic demand is expected to keep inflation high in 2022 (10.9%) before a slow down at 8.1% in 2023 (IMF, October 2021). Tightening of monetary and credit policies will be required for inflation to moderate in the coming years. The current account deficit of USD 3.96 billion increased due to the decline in remittances and a trade deficit driven by purchases to diversify the economy. In 2022, the deficit is expected to further increase with the rebound in imports, reaching USD 4.1 billion or -5.6% of GDP. Key economic challenges in Uzbekistan include lack of economic diversification, reliance on commodity prices, a large informal economy, low economic competition, an underdeveloped banking sector, and state intervention in credit, prices, administrative, and custom affairs (COFACE, 2021). The Government's 2017-2021 strategic plan included reforming bureaucracy, establishing rule of law, opening the economy, and promoting, education, health, and infrastructure to attract private investments and reduce both unemployment and poverty. The Government's aims to transform Uzbekistan into an industrialised, upper-middle-income country by 2030, and has recently announced plans to modernise the agriculture sector, reduce its ownership of state-owned assets and enterprises, and address constraints in the financial markets. In 2020, the Uzbek government's efforts to mitigate the economic impact of the COVID-19 pandemic included additional spending on health care (including for medicines, the costs of quarantines, and salary supplements for healthcare workers) and social assistance (as there was an increase in the number of families with children and low-income families receiving social benefits), as well as international financial support (from the World Bank, the IMF, and the ADB). The government created an Anti-Crisis Fund of USD 1 billion (about 2% of GDP), temporary reduced some taxes, postponed the payment of property and land taxes, extended a moratorium on tax audits, and delayed tax declarations for 2019 income taxes.

According to the Ministry of Employment and Labour Relations of Uzbekistan, the unemployment rate was 9.4% in 2021. However, this rate severely underestimates the size of the informal sector. According to Coface, 58% of employment is in the informal sector, which was the hardest hit by the COVID-19 pandemic. Moreover, the overall economic growth and increased urbanisation in the recent years contradict the persisting poverty. The country is threatened by decades-long tense relations with Kyrgyzstan along the border. However, emerging economic ties and warming social relations between the two countries give hope to a friendly resolution of the issue. Other risks include resolving border disputes, water issues, and food security. The continued expansion of social assistance and public investments to improve rural infrastructure, and vaccination costs, will continue to elevate public spending in 2021. This will be partially offset by higher tax, mining, and privatization revenues, leading to an overall fiscal deficit of 5.5% of GDP in 2021. COVID-19 uncertainties and a forthcoming VAT rates reduction in 2023, are likely to contribute to a higher medium-term fiscal deficit. A robust economic recovery, the gradual withdrawal of anti-crisis measures, and tax administration reforms to widen the tax base are projected to help consolidate public finances and stabilise debt at about 40.5% of GDP by end-2023.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 59.8969.2079.1291.90106.99
GDP (Constant Prices, Annual % Change) 1.97.45.24.74.9
GDP per Capita (USD) 12222
General Government Gross Debt (in % of GDP) 37.635.834.133.130.8
Inflation Rate (%) 12.910.811.210.89.5
Unemployment Rate (% of the Labour Force) 10.59.510.09.59.0
Current Account (billions USD) -3.01-4.83-2.63-3.88-5.20
Current Account (in % of GDP) -5.0-7.0-3.3-4.2-4.9

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Uzbekistan has a workforce of 14.4 million out of its 34.2 million population (World Bank). Agriculture plays a major role in the economy; it accounts for 25.5% of GDP and employs 25.7% of the total workforce. Main agricultural products include cotton, wheat, barley, rice, maize, potato, vegetables, fruits, and livestock. The country also produces silk and wool and is attempting to diversify its agriculture towards fruits and vegetables. Poland, Russia, and the Netherlands have strengthened agricultural relations with Uzbekistan. According to a report by the Uzbek Centre for Economic Research and Reform and the United Nations Development Program in Uzbekistan, the country's agriculture sector was the least affected by the COVID-19 pandemic, along with both the forestry and the fishing industries.

The industry accounts for 33.6% of GDP and employs 23% of the total workforce (World Bank). Manufactured products included textiles, food processing, machine building, metallurgy, mining, hydrocarbon extraction, and chemicals. The country is also rich in coal, zinc, copper, tungsten, uranium, and silver. Although the industrial sector suffered with the pandemic, 43% of the Uzbek Anti-Crisis Fund - an economic package implemented to mitigate the negative impact of the pandemic on the country’s economy - was allocated to the industrial sector, including thermal power plants, regional power networks, oil and gas networks, air transport, and the rubber industry.

The services sector accounted for 36% of GDP and employs 51.3% of the total workforce (World Bank). Key services include transportation and tourism. Uzbekistan was the fourth fastest growing country for tourism in 2019 (+27.3%), receiving 6.7 million tourists (United Nations World Tourism Organization). However, in 2020, the tourism industry was the most affected by the pandemic, particularly the hospitality and the food services sectors. Nevertheless, tourism should resume growth in 2021 and 2022.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 25.7 23.0 51.3
Value Added (in % of GDP) 26.1 32.8 33.5
Value Added (Annual % Change) 3.0 3.7 -0.1

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
58,3/100
World Rank:
108
Regional Rank:
21

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.
 

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Latest Update: November 2022

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