Uzbekistan’s economy has remained resilient to recent global challenges and has continued to grow at a rapid pace, the International Monetary Fund (IMF) announced following its staff visit to the Central Asian state in December. The IMF said the outlook is positive, but underlined several risks.

It noted that following geopolitical shocks, Uzbekistan’s economy had seen an influx of migrants and a large increase in remittances in 2022, boosting domestic demand. This, coupled with higher external demand, led to real GDP growth of 5.7% in 2022. While remittances had fallen to the trend prevailing prior to Russia’s war in Ukraine, a sizable fiscal expansion and high wage and export growth were expected to sustain real GDP growth at 5.7% in 2023.

Strong imports and declining remittances were expected to contribute to a higher external current account deficit last year. International reserves were set to remain ample at eight and a half months of prospective imports. The 12-month inflation rate was projected to decline by more than 3 pp y/y to 9%.

The IMF said that preserving macro-financial stability and continuing structural reforms were key to bolstering resilience and sustaining robust economic growth amidst the challenging current global context.

The consolidated fiscal deficit was estimated to reach 5.5% of GDP in 2023, exceeding the 3% of GDP budget target due to additional wage hikes as well as higher social benefits, energy subsidies, and policy lending.

“Monetary policy should remain tight to continue to reduce inflation. Needed increases in administered energy prices are expected to raise inflation. However, the effect will be partially offset by continued tight monetary policy and a sizable fiscal consolidation,” the official message from the Fund said.

The statement welcomed the commitment of the Central Bank of Uzbekistan (CBU) to keep monetary policy relatively tight until inflation decelerates clearly toward the target and to raise the policy rate if core inflation surprises to the upside.

It also urged the continuation of financial sector reforms to safeguard stability, adding that continued implementation of structural reforms would be a key to sustaining robust growth.