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ADB raises Uzbekistan's GDP growth outlook

22 September 2021

The Asian Development Bank (ADB) raised the prediction of GDP growth in Uzbekistan from 4 percent to 5 percent in 2021, and 5.5 percent in 2022, Trend reports citing September Update of ADB’s Asian Development Outlook (ADO) 2021.

Uzbekistan government reported GDP growth recovering from only 0.5 percent year on year in the first half of 2020 to 6.2 percent in the same period of 2021.

Industry reversed a 1.2 percent decline a year earlier to expand by 8.5 percent with increases in manufacturing, mining, and quarrying. Growth in services accelerated from 0.3 percent to 8 percent on gains in trade, transport, and storage. Growth in construction slowed from 7.1 percent to 0.1 percent with contraction in building starts.

Agriculture growth slowed from 2.8 percent to 1.8 percent as water shortage constricted crop production but livestock expanded.

On the demand side, gross capital formation reversed a 12.8 percent decline in the first half of 2020 to rise by 5.9 percent year on year with higher infrastructure development and upgrades to machinery and equipment in the industry.

Consumption reversed a 1.2 percent decline with growth estimated at 4.5 percent as recovering household income boosted demand. Trade deficits widened by 35.1 percent for goods and 12.6 percent for services.

Despite wage increases, inflation slowed in the first half of 2021 from 13.9 percent a year earlier to 10.9 percent. Improved food production helped to slow the rise in food prices from 17.5 percent to 14.5 percent, though food inflation has recently reaccelerated.

Inflation for other goods slipped from 9.6 percent to 8.6 percent and, with tariffs for electricity and gas unchanged, fell for services from 13.8 percent to 8.4 percent. To bring inflation below 10 percent in 2021, Uzbek Central Bank has kept its policy rate at 14 percent since September 2020.

With continuing tight monetary policy and energy tariffs unlikely to change, this update retains earlier projections for inflation in 2021 and 2022.

The current account deficit widened in the first half of 2021 from the equivalent of 7.4 percent of GDP a year earlier to 9.6 percent on rising imports of capital and intermediate goods and transport services.

Exports of goods expanded by 13.7 percent, reflecting large gains in textiles, copper, and petrochemicals, though gold exports fell by 34.7 percent with a 9 percent drop in world market prices.

Imports rose by 23.5 percent on higher imports of machinery and equipment, ferrous metals, and petrochemicals. Service exports remained unchanged as the pandemic limited demand for transport and travel services, but imports rose by 5.6 percent on higher demand for cargo services.

Recovery in remittances increased primary and secondary income by 14.3 percent. With imports rising notably, this Update widens projections for current account deficits in 2021 and 2022.