Population 29.449 million
GDP 51.622 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
| GDP growth (%) |
8.5 |
8.3 |
7.4 |
6.5 |
| Inflation (yearly average) (%) |
9.4 |
12.8 |
12.9 |
10.7 |
| Budget balance (% GDP) |
4.9 |
9 |
3 |
2 |
| Current account balance (% GDP) |
6.2 |
5.8 |
4.7 |
3.3 |
| Public debt (% GDP) |
10 |
9.1 |
8.8 |
8.5 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Abundant and diversified natural resources (natural gas, gold, cotton and oil)
- Comfortable current account surpluses and foreign exchange reserves
- Ambitious public investment programmes
WEAKNESSES
- Weak economic diversification and dependence on raw materials prices
- Slowness of reforms
- Underdeveloped banking sector and practice of directed credit
- State interventionism and difficult business climate
Risk assessment
Growth sustained by public investment
Uzbekistan posted strong growth in 2012 thanks to an expansionary budget policy, sustained domestic demand and the godsend from the gold and hydrocarbons sectors. Growth will remain very buoyant in 2013 despite a slowdown linked to probable downward pressures on cotton prices. Activity will be driven by external demand, particularly Russian, Kazakh and Chinese (55% of exports), high gas and gold prices (47% of sales), so industrial production, in particular mining, should perform well. With good revenues from foreign trade, the government will continue its offensive of supporting activity aimed at modernising industry. The rise in public sector wages and in public spending together with continued transfers from expatriate workers in Russia and Kazakhstan will contribute to the dynamism of household consumption. Retail, services, transport and telecommunications are therefore expected to continue to post good results. Inflation will remain above 11% in 2013 despite the expected moderation of food prices. The current account surplus fuels monetary creation rendering administrative price controls ineffective. Moreover, the official indices probably underestimate the extent of inflationary tensions. In general, the statistics are unreliable and make it more complicated to assess a possible overheating of the economy.
Difficult business environment despite the announced reforms
Thanks to low public debt and massive foreign exchange reserves, the country is spared financial pressures. However, the economy remains dollarized due to foreign exchange restrictions and inflationary pressures. The underdeveloped banking system operates in an environment closely controlled by the state, which owns 70% of the sector. State control over lending policy, in particular, weakens the quality of the portfolios, providing for very dynamic credit supply, subject to prudential supervision judged by the EBRD to be very weak. The burden of administrative controls adversely affects the country’s attractiveness: import barriers, restriction on access to foreign exchange, quotas set by the state in the agricultural sector, etc. The government has admittedly begun a policy aimed at ease these multiple constraints, in particular by moving to expand privatisations. However, the administration’s control of the economy is not expected to be dismantled rapidly due to significant systemic corruption, as testified by Transparency International’s rating of the country in 170th place out of 174 countries studied, the most worrying performance in the CIS.
Latent political tensions
Few changes are to be expected in the interventionist and well-established regime of Islam Karimov in 2013. The President’s clan does not intend to give up its control of the political institutions. The president has led the country since 1987 and was re-elected in 2007 for a third seven-year term. Despite the prospective reduction of the term to five years, he will probably wait until 2014, to organise new elections. However, the Head of State is old. The succession process remains very uncertain and could encourage a popular uprising in a context of a weakened government. Poverty, unemployment and restriction of liberty offer a fertile soil for conflict despite repression. At the regional level, the country, exposed to the rise of radical Islamic movements, has at times very tense relations with neighbouring countries. Tensions between Uzbeks and Kyrgyzes in Kyrgyzstan are a potential factor of instability.
