Uzbekistan Economic Forecast

GDP likely grew faster in 2022 than was forecast at the onset of the war in Ukraine amid higher inflows of capital and remittances from Russia. That said, in Q4, annual GDP growth eased slightly due to slower expansions in the manufacturing, hospitality and electricity and gas sectors. Turning to Q1 2023, economic growth continued to decelerate, falling to 5.5% from 5.7% in Q4. The slowdown was broad-based; agriculture and industrial output expanded at a softer pace in Q1 amid lower production growth in manufacturing and construction, while services growth eased due to softer expansions in retail sales, food trade and information and communications technology. Meanwhile, the president won a referendum on 30 April, enabling him to remain in power until 2040. This cementing of authoritarian power bodes poorly for reforms that could raise living standards or encourage foreign investment.

Inflation eased to 11.0% in April (March: 11.7%), remaining above the Central Bank’s 5.0% target. As core inflation slowed in Q1, the Bank lowered interest rates by 100 basis points to 14.00% on 16 March. This year, inflation should ease slightly from current levels but remain above the Bank’s target. Commodity price swings, currency volatility and a poor harvest are risks.