Theory of economics

Figure 10. Some indicator of Uzbekistan⁹

Cumulative data for January–September suggests the economy remained mostly anemic throughout Q3, as the pandemic and related measures dragged on activity, although output seemingly recovered markedly from Q2’s sharp contraction. On the production side, agricultural activity saw an uptick in output, as did the construction sector. However, industrial output deteriorated further in Q3 despite a small uptick in manufacturing production, mainly due to a severe contraction in mining and quarrying activity. Moreover, the services sector was fairly weak in the quarter. Looking at Q4, the recovery could be curtailed by weaker demand abroad as many countries reinstate lockdown measures. Moreover, although domestic Covid-19 cases are notably below the numbers seen in August and September so far in the quarter, a possible flare-up in infections threatens to derail the year-end recovery.

The Covid-19 pandemic and related containment measures will bite into growth this year. However, growth should regain healthy momentum in 2021 as external demand normalizes, leading to a rebound in industrial production. Volatile commodity prices and a possible next wave of infections bringing more restrictions pose downside risks to the outlook. FocusEconomics panelists forecast GDP to grow 5.2% in 2021, which is down 0.1 percentage points from the previous month’s forecast. For 2022, the economy is seen growing 5.9%.

In the first half of 2020, GDP growth was nearly zero compared to growth of 5.8 percent in the first half of 2019. Investment in fixed capital decreased by 12.8 percent in the same period. The unemployment rate increased sharply from 9.4 percent in the first quarter of 2020 to 15 percent in the second quarter.

Higher gold production and agriculture growth helped offset a sharp fall in industry and services. A cumulative increase of 17 percent in social payments and a 10 percent increase in minimum wages since February have helped preserve private consumption despite a 19 percent decline in remittances.

Lower remittances and a wider trade deficit widened the current account deficit to 7.7 percent of GDP in the first half of 2020. Exports fell by 22.6 percent in the same period, due to supply chain disruptions and a fall in key commodity prices (natural gas, metals). Imports fell by 15 percent due to a sharp fall in machinery and capital imports.

The fiscal deficit increased to 5 percent of GDP. About 2.5 percent of GDP was directed to support health, low-income allowances, public works, and enterprises.

Annual inflation was eased down to 11.6 percent in August, which allowed the Central Bank to cut its policy rate twice in 2020, from 16 to 15 percent in April and to 14 percent in September. Anti-crisis credit lines to firms helped increase credit to the economy by 18 percent in January–August 2020.