Uzbekistan, under President Shavkat Mirziyoyev's leadership since 2016, has undergone a notable transformation. Once a pariah, the country has opened up to the rest of the world and he has begun the work of regional integration, boosting both political and economic ties.

Increasingly, Central Asia is acting as a coordinated regional block. There are moves underway to create a “Silk Road Schengen”, and cross-border trade and investment ties are flourishing. The presidents of the five ‘Stans are also increasingly travelling together in the so-called C5 format, as the current geopolitical tensions have once again made Central Asia a geopolitically important region.

The US, as part of its campaign to box in Russia and cut off its trading options, is also now interested in increasing its sway in the region, wedged between its traditional economic partners China and Russia, – without much success. All of the ‘Stans have adopted a policy of neutrality but all have maintained their trade ties with Russia in a delicate balancing act.

Under the new open and progressive reform agenda Uzbekistan’s economy has been growing by approximately 6% per annum, with only a brief pause during the 2020 pandemic.

Mirziyoyev's initiatives have also improved its human rights record, notably ending the embargo on textile and cotton product exports, but democracy still remains stunted as the president retains all power and the opposition is largely non-existent.

A substantial privatisation drive is underway, although progress has been slower than hoped. The entire cotton industry has been sold off, once the country’s cash cow, but privatisation in other sectors like banking is progressing with less speed than hoped.

A lot of progress has also been made in modernising the energy sector, with a new gas supply deal with Russia largely eradicating shortages of fuel. The modernisation of power stations to meet the growing energy needs of a fast-growing economy are in hand, and renewables already make up over 25% of the country’s generating capacity.

The macroeconomic situation is stable, with inflation still high but falling. International reserves remain robust thanks to the country’s gold production. Ongoing banking reforms have also created a solid financial system, but the predominance of state-owned banks and the legacy of state-directed lending remain problems to be resolved.

Incomes remain a fifth of those in neighbouring oil-rich Kazakhstan, but nominal wages have been rising since Mirziyoyev took office, and as inflation falls real incomes are rising too, to create the beginnings of a middle class that is fuelling both consumption and manufacturing.

The population has welcomed these changes and Mirziyoyev remains universally popular despite the lack of a pluralistic political system. Uzbekistan has one of the youngest and fastest-growing populations in the Former Soviet Union (FSU), and the government is fully focused on job creation and has implemented extensive education reforms and industrial policies to enhance added value. The citizens have seen a palpable improvement in the quality of life in the last six years.

The outlook for 2024 is positive, with the continuation of these policies expected to support Uzbekistan's robust economic growth in recent years.

 

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