Uzbekistan’s growth will slow in 2020 due to the COVID-19 pandemic and a lower price for natural gas and copper, but higher investments coupled with gains in industry and agriculture are expected to fuel a recovery in 2021, a new Asian Development Bank (ADB) report says.

In its flagship annual economic publication Asian Development Outlook (ADO) 2020, ADB projects gross domestic product (GDP) growth for Uzbekistan to be 4.7% in 2020, slower than last year’s 5.6% growth.

ADB forecasts GDP growth to bounce back to 5.8% in 2021, with reforms boosting growth in agriculture, industry, and services.

“While we don’t yet know the full scale of the pandemic’s impact, the Government of Uzbekistan is taking significant and appropriate measures to sustain its reform agenda and reduce the time required for the economy to recover from the slowdown,” said Ms. Cindy Malvicini, Country Director of ADB’s Uzbekistan Resident Mission. 

Investments are expected to remain a major growth driver for 2020 and 2021, reflecting further improvement of government-led investments in developing urban infrastructure and manufacturing facilities. Private consumption is expected to benefit from periodic wage growth and slowing inflation despite the adverse effect on remittances of currency depreciation in the Russian Federation.

Inflation is projected to decelerate to 13% in 2020 and further to 10% in 2021 as the central bank gradually shifts toward inflation targeting, while fiscal tightening with policy-guided lending reforms are expected to halve credit growth. However, planned price hikes for electricity and natural gas, as well as further deregulation of prices in agriculture, will maintain inflationary pressures.

Exports of natural gas and copper are expected to decline in 2020, offset by higher gold exports. In 2021, exports should expand with structural reforms in agriculture, improved infrastructure for services and industry, and higher external demand for natural gas. This trend is expected to narrow the current account deficit.

The report highlights the need to continue efforts to contain inflation as Uzbekistan undergoes comprehensive reforms to transform into a market economy. ADB suggests further consolidating the credit market and smoothing price adjustments for electricity and other utilities with targeted offsets in order to mitigate their impact on the poor.

In order to further curb inflation, the report encourages the government to continue to promote private sector involvement in the transportation, education and health care industries, and streamline customs clearance procedures to avoid price escalation for imports.

Since Uzbekistan joined ADB, the bank has committed 78 loans totaling $8.6 billion, including two private sector loans totaling $225 million. ADB also provided $6 million in equity investment, $218 million in guarantees, and $105.2 million in technical assistance grants.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.