Uz Daily
In Uzbekistan, Russia’s invasion of Ukraine will slow growth to 3.6 percent in 2022, compared to pre-crisis estimates of about 6 percent. An anticipated 50 percent fall in remittances (from a weaker ruble and the collapse of Russia’s economy) and higher oil, wheat, and cooking oil prices will sharply lower private consumption. Investment growth is also expected to slow given the heavy reliance on Russian capital imports and bank financing for public and private investment projects.
Although Uzbekistan will benefit from high global commodity prices (gold, copper, and natural gas), an estimated 6 percent of GDP fall in remittances will widen the current account deficit to 10 percent of GDP in 2022. With foreign investments from Russia expected to fall, FDI inflows will be subdued in 2022 and take time to recover.
As a result, the higher current account deficit is expected to be financed by new public debt and the use of reserves. Higher revenues from commodity exports and privatization receipts and slower public investment spending are likely to offset higher social spending to support remittance-dependent households and prevent an anticipated sharp rise in poverty levels from falling remittances and the return of potentially large numbers of displaced migrant workers.
As a result, the overall fiscal deficit is expected to fall to 4 percent of GDP in 2022. An anticipated fiscal consolidation by 2023 is now likely to be delayed. The government is expected to continue adhering to its overall debt limits, and public debt is expected to peak at 42 percent of GDP in 2022-23 and stabilize at about 40 percent of GDP by end-2024.
These projections remain subject to significant further downside revisions depending on the duration of sanctions on Russia, potential global financial spillovers from US interest rate changes, further COVID-19 waves, and the impact of trade and logistics disruptions to Uzbekistan’s supply chains.
