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IMF: Economic growth in Uzbekistan to be positive due to growth in construction sector

22 September 2020

Provided the pandemic gradually abates in 2021, economic growth is expected to pick up to about five percent in 2021, Trend reports with reference to the International Monetary Fund.

An International Monetary Fund (IMF) mission, led by Assistant Director in the International Monetary Fund's European Department and current mission chief for Ukraine Mr. Ron van Rooden, conducted a virtual staff visit to Uzbekistan during to discuss economic developments and policies.

"The authorities' efforts to mitigate the economic impact of the crisis, caused the COVID-19 pandemic, have mainly consisted of fiscal measures, with sizable additional spending on health care and social assistance, and support for small businesses, including tax relief," said Mr. van Rooden at the end of the mission.

The Central Bank of Uzbekistan (CBU) has lowered its interest rate from 16 to 14 percent and provided ample liquidity to the banking system while encouraging banks to allow affected sectors to defer loan repayments.

With the fiscal stimulus measures and combined with the losses in tax revenues due to the decline in activity, the consolidated fiscal deficit is projected to increase from about 2 1/2 percent of GDP in 2019 to almost six percent of GDP this year (and almost 7 1/2 percent of GDP including policy lending).

"International financial support, including from the IMF, the World Bank, the Asian Development Bank, and others, will help cover the financing needs in Uzbekistan that have arisen from the crisis," added van Rooden.

Supported by these efforts, economic growth, while slowing markedly, is still expected to be moderately positive this year, with continued growth notably in the construction sector. Inflation, although still high at just over 11 percent, has gradually come down and with a relatively tight monetary policy stance is expected to decline further in the period ahead toward the CBU's inflation targets.

"While the authorities' focus has been rightly concentrated on addressing the COVID-19 crisis, they have not lost sight of the reform agenda and the medium-term goal of achieving stronger, sustainable, and inclusive economic growth, to improve people's living standards," van Rooden said.

Nonetheless, the authorities continue to make progress, notably in strengthening economic institutions, including by enhancing capacity particularly at the Ministry of Economic Development and Poverty Reduction, the Ministry of Finance, and the CBU.

Rooden believes that the crisis should not delay the reform of the state-owned banks, enterprises, and the agricultural sector.

"The IMF stands ready to continue to support Uzbekistan in these efforts with policy advice, technical assistance, and financial assistance if needed," noted van Rooden.