Uzbekistan’s economy, which expanded by 6% in 2023, is projected to grow by 5.3% in 2024, according to the latest report by the World Bank (WB) covering Europe and Central Asia Economic Update. The forecast represents a downgrade by 0.2 percentage points from the January report (5.5%). The country’s GDP growth forecast for 2025 remains at 5.5%, the WB office in Uzbekistan noted in a press release.
Improved forecasts for 2023
Real GDP of Uzbekistan grew by 6% (0.5 percentage point increase) in 2023, led by investment, private consumption, and exports, the report said.
Faster investment growth was facilitated by credit growth to state-owned enterprises (SOEs) and the private sector. Real credit (loans to SOEs and private sector) grew by 11.6% between 2022 and 2023, up from 5.1% between 2021 and 2022.
Consumer price inflation fell to its lowest level in seven years, dropping to 8.8% in December 2023, compared to 12.3% in 2022. This was driven by sustained, tight monetary policy, as well as a VAT tax rate cut and lower international food and energy prices.
In 2023, the Uzbek soum depreciated by 9% against the U.S. dollar (USD), in part due to a flow on effect of the depreciation of the Russian ruble (a close trading currency) against the USD.
The current account deficit deteriorated as import growth accelerated and remittances declined in 2023 (the latter was related to the ruble’s depreciation).
Uzbekistan’s gas exports dropped by half, and amid rising domestic gas needs, Uzbekistan began importing gas from Russia in 2023 for the first time.
The fiscal deficit expanded from 4.1% in 2022 to 5.8% of GDP in 2023 due to emergency spending on energy infrastructure and fuel during the cold winter, higher spending on salaries and social benefits, energy subsidies, and subsidized lending to SOEs via state-owned banks.
Foreign reserves remained ample at $34.6 billion by December 2023, more than eight months of prospective imports.
Robust real wage growth contributed to reducing poverty from 5% in 2022 to 4.5% in 2023, measured at the lower-middle income poverty line (USD 3.65/day, 2017 PPP).
The unemployment rate has dropped to 8.1% in 2023, down from 8.9% in 2022.
Average real wages in 2023 increased by 7.8% not only due to growing demand but also because of skills shortages in the labor market. As a result, wage growth was higher among the more skilled (and wealthier) workers than among the poor, resulting in higher income inequality, WB experts noted.
2024 Outlook
GDP growth is projected at 5.3% in 2024 given the expected fiscal consolidation and slower export growth prospects to Russia and China, Uzbekistan’s key trading partners, according to WB estimates.
Growth will be supported mainly by the continued implementation of structural reforms, notably SOEs' restructuring and privatization, and high energy sector investment, WB stated.
Inflation is expected to increase in 2024 due to relatively sharp increases in domestic energy prices because of the energy tariff reforms (accompanied by social protection measures). This will be partially offset by a continued tight monetary stance while the central bank completes its transition to full inflation targeting. Inflation is expected to decelerate to 8% in the medium term, higher than the Central Bank of Uzbekistan (CBU) target of 5%.
Import growth is expected to moderate in 2024 but remains buoyant as imports support both economic modernization and growing consumption.
Remittances in 2024 are projected to decline mainly due to an expected reduction in the number of labor migrants to Russia. With decreasing remittances and strong imports, the current account deficit will widen slightly but remain sustainable as Uzbekistan’s transformation process brings in foreign savings to finance the deficit.
This economic outlook is expected to reduce poverty moderately to 4.3% in 2024.
The fiscal deficit is expected to fall to 4.2% of GDP in 2024 and towards 3% of GDP by 2026 as large, untargeted energy subsidies and ineffective incentives to SOEs are withdrawn, and thanks to growing budget revenues amid privatization proceeds.
The government is expected to adhere to its debt limits (60% of GDP for total Public and Publicly Guaranteed debt), with public debt slightly increasing to 36.5% of GDP in 2024 and then gradually declining to 34.4% of GDP by 2026.
Risks to outlook are tilted to the downside. External risks include possible deterioration of growth in key trading partners, notably China and Russia, and further tightening of external financial conditions. Domestic risks stem from the growing contingent liabilities from SOEs, PPPs, and state-owned banks.
Upside risks include higher global gold and copper prices and stronger productivity growth due to ongoing structural reforms.
Central Asia Outlook
Regional growth is likely to drop to 2.8% in 2024, following substantial strengthening to 3.3% last year because of a shift from contraction to expansion in the Russian Federation and war-hit Ukraine, and a more robust recovery in Central Asia.
Uzbekistan is anticipated to rank among the five fastest growing economies in the Europe and Central Asia region, along with Tajikistan (6.5%), Armenia (5.5%), Georgia (5.2%), and Kyrgyzstan (4.5%).
Prospects for economic growth in the region are adversely affected by a weakening global economy, tight monetary policy, a lackluster recovery in China, and lower commodity prices.
Economic growth in Türkiye is forecasted to slow to 3%, marking the lowest since 2009, excluding the COVID-19 pandemic period, as fiscal consolidation attempts are expected to restrain domestic demand.
Lower global oil prices are expected to cool economic growth across all Central Asian countries, which is projected to decline to 4.1% this year, down from an estimated 5.5% in 2023.
