Newsletter Issue 13 | July – August 2021

Economic growth reaches pre-crisis level

After growing by only 1.6% last year due to the pandemic, the Uzbek economy is expected to return to strong growth of 5.0% in 2021. The pick-up in economic output is reflected above all in a significant increase in investment and services. Exports also grew strongly by 12% in the first half of 2021, and imports by as much as 15%. Likewise, remittances show a significant increase of 37% compared to 2020.

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Economic Monitor Issue 05 [updated] | June 2021

Overview

  • 2020: economic growth of 1.6% despite pandemic
  • 2021: return to high growth of 5.0%
  • Strong increase of investments (7.0%) and services (7.7%) expected in 2021
  • Decreasing inflation from ca. 11% by end 2020 to single digit by end of 2021
  • Real wage growth slowed down during pandemic, but is expected to speed up again in 2021
  • Stable exchange rate vs the US dollar in 2021 and very high international reserves
  • Growth of remittances by 37% in 6M 2021 indicates recovery of migrants’ host countries
  • Budget deficit with 4.4% of GDP in 2020 lower than expected, 5.5% forecast for 2021; no threat to fiscal sustainability
  • Strong recovery of trade: imports increased by 15%, exports by 44% (without gold) in 6M 2021
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Newsletter Issue 12 | May – June 2021

Key bottlenecks for Uzbek exports to the EU

In April 2021, Uzbekistan received the GSP+ status from the EU, which significantly lowers tariff barriers for Uzbek products on the EU market. Against this background, we examine the bottlenecks for Uzbek products with the highest export potential in the EU – fruits and vegetables as well as apparel.

For fruit and vegetables, we identify as most pressing bottlenecks the cold chain, the availability of high-quality packaging and food safety certification. In the case of apparel, the poor image about labour standards is a significant obstacle, which prevails despite Uzbekistan meeting ILO standards. Another pressing bottleneck is the expensive audit of compliance with social standards.

To overcome these bottlenecks, we recommend supporting investment into precooling facilities, reducing Uzbek import duties for packaging and providing education, training and financial support for quality management at companies. In the case of apparel exports, we suggest an information campaign in the EU on compliance with ILO standards and a state support scheme for international social responsibility standards certification.

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Newsletter Issue 11 | March – April 2021

Reform proposals from German companies in Uzbekistan

Reforms to modernise Uzbekistan towards an open market economy are proceeding at pace. To support this effort, the German Economic Team (GET) and German business associations active in Uzbekistan presented a study of 18 reform proposals. The proposals are based on suggestions from companies and hence constitute concrete steps to solving practical problems. If implemented, they will contribute to further improving the investment climate, thus unlocking more investment in Uzbekistan.

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Newsletter Issue 10 | January – February 2021

COVID-19 pandemic slows growth only temporarily

Despite the COVID-19 crisis, the economy in Uzbekistan grew by 1.6% in 2020. In sectoral terms, agriculture showed the greatest growth momentum with 3%. Government consumption also increased, while investments declined. For 2021, significantly higher growth of around 5% is forecast, which is roughly at pre-crisis levels.

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Economic Monitor Issue 04 | January 2021

Overview

  • Main reason for economic slowdown: lower investment
  • Positive contributions to GDP of government consumption (+3.6% yoy) and agricultural sector (+3.0% yoy)
  • 2021: GDP forecast to pick up by 5.0%
  • Inflation declined to ca. 11% by end 2020 and opened space for CBU to decrease its policy rate by 2 pp to currently 14%; CBU targets an inflation of 5% by end 2023
  • Depreciation of Sum by 8.5% vs USD in 2020 in line with inflation
  • International reserves (gold and FX) increased to USD 32.9 bn or 14 months of imports; main reason: higher gold price
  • Current account deficit below 6.4% of GDP in 2020 due to rise in remittances
  • Exports down by 6%; gold exports compensated decrease of other items; imports dropped by 9%
  • Budget deficit increased to high 7.5% of GDP in 2020, but no threat to fiscal sustainability
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Newsletter Issue 09 | November – December 2020

Uzbek exports to the EU in 2019 amounted to just USD 160 m or 1% of total goods exports, which is low compared to other Central Asian countries. At the same time, the Uzbek Government is very interested to increase exports to the EU and thus to diversify.

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Newsletter Issue 08 | September – October 2020

Demographic transition, COVID-19 and labour migration

Uzbekistan’s working-age population will increase by up to 1% per year until 2040, thus requiring up to 300,000 new jobs per year. Under optimistic assumptions about the economic recovery from the COVID-19 pandemic, the number of Uzbekistani labour migrants abroad could grow by 50,000 per year in the long run, so that one in six extra jobs needed could be found abroad. In the short run, however, the COVID-19 pandemic has reduced the number of migrants by one fifth to 2 m during the first half of 2020 with unemployment and economic inactivity rising sharply. To harness labour migration for job creation and development, Uzbekistan is implementing a comprehensive set of measures including job placement abroad, obligatory language and skills training and consular support for migrants. These measures are well-advised and, going forward, will benefit from evaluation, prioritization, and updating in line with international best practices.

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Newsletter Issue 07 | July – August 2020

Prospects for Uzbekistan’s energy sector

Uzbekistan’s energy sector still heavily depends on natural gas. As domestic reserves are depleting and the demand for electricity is increasing, the Uzbek government wants to diversify the country’s energy supply. The large-scale expansion of wind and photovoltaic (PV) electricity generation, the construction of the country’s first nuclear power plant and the replacement of the old power plant fleet with more efficient gas-fired plants are at the core of the government’s 2030 investment plan. Using an electricity system model, we show that the plan’s strong focus on inflexible baseload generation implies excessive system costs. We find that a higher deployment of flexible generators and renewables would reduce system costs. In 2019, a first PV tender had promising results.

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Newsletter Issue 06 | May – June 2020

Impact of COVID-19 on the Uzbek economy

The Uzbek economy is projected to grow by 1.5% in 2020 – before the COVID-19 crisis, an increase of 6% had been expected. The lower figure results from lower growth in consumption and investment as well as in services and industry. Agriculture is almost unaffected by the crisis.

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Economic Monitor Issue 03 | June 2020

Overview

  • 2020: positive growth of 1.5% despite COVID-19
  • Without the pandemic, growth would have been 6.0%
  • Strong increase in government spending to support the economy
  • Agriculture hardly affected by quarantine measures, growth of 2.6% expected
  • Slight decline of inflation
  • Sum depreciated by 6% against the USD in January-May 2020 as exports and remittances declined
  • High international reserves of USD 31.3 bn (May 2020) – 14 months of import coverage
  • Current account deficit expected to rise to 9.6% of GDP in 2020
  • FDI inflows will fall to 1.2% of GDP in 2020, after 3.9% in 2019
  • Budget deficit will increase to 5.6% of GDP in 2020
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Newsletter Issue 05 | March – April 2020

Small and medium-sized enterprises in Uzbekistan

The economic significance of private small and medium-sized enterprises (SMEs) for the Uzbek economy is still very limited. In the past, the state has primarily promoted private small enterprises with tax concessions and subsidised loans, but the government has now set itself the goal of increasing the importance of the private SME sector.

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Economic Monitor Issue 02 | February 2020

Topics:

  • Pharma park and cluster. Roadmap presented to government
  • Reform of state-owned enterprises. Important future reform area
  • Energy sector. Investment in infrastructure and energy generation needed
  • Doing Business Index. Progress in improving investment and business climate
  • SME support. Rethinking of SME funding policy necessary
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Newsletter Issue 03 | November – December 2019

Export potential for Uzbek textile and apparel

The manufacture of textile and apparel is among the key sectors of the Uzbek economy. In 2018, it ac-counted for 17% of manufacturing and provided 11% of goods exports. The main destination of Uzbek exports are neighbouring countries. Russia, China, Kazakhstan, Kyrgyzstan and Iran absorb 81% of the sector’s exports.

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Newsletter Issue 02 | September – October 2019

Cluster-oriented reform model for free economic zones

The first free economic zone (FEZ) in Uzbekistan was established in 2008. Since then, 20 additional FEZ were created throughout the country. Drawing on international experience, a reform process has been initiated in 2018 to increase the effectiveness of the zones. As one reform option, a cluster-oriented model has been examined.

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Economic Monitor Issue 01 | August 2019

Topics:

  • Development Strategy 2017 2021: Implementation of comprehensive reform agenda in 5 key areas
  • Tax reform: Positive implications for investment and business climate, but also for the state
  • Banking sector: Reforms in this state dominated sector are indispensable
  • Export potential of textile products: Identification of promising products
  • Reform of free economic zones: Cluster approach offers the chance to increase effectiveness
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Newsletter Issue 01 | July – August 2019

Positive economic outlook thanks to reform dynamics

For two years now, Uzbekistan is in the focus of many international observers. President Mirziyoyev has ini-tiated a comprehensive reform and modernisation process, which aims to transform the country from a closed, state-centred economy into an open market economy.

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