Azernews.Az

By Vusala Abbasova

The International Monetary Fund evaluated highly the progress of Uzbek structural reforms, following annual consultation with Uzbekistan ending in late August 2015.

The Fund's experts noted that the economy of the country has been resilient in a difficult external environment of economic crisis.

The country's GDP increased by 7.5 percent over the first quarter of 2015, while the growth in 2014 amounted to 8.1 percent.

The Uzbek economy has shielded itself from the slowdown experienced by other countries in the region mostly due to public investments.

The external position of the country continues to be strong, and inflation has softened to around 9 percent through April 2015, owing to lower-than-anticipated price increases.

However, the difficult external environment, especially the drop in oil and gas prices and spillovers from the economic slowdown in major trading partners, are taking a toll on the export sector. Notably, gas and machinery exports were negatively affected.

Remittances fell by 14 percent in 2014 and 45 percent for the first quarter in 2015, compared to the corresponding periods of the previous year, according to the IMF.

The Uzbek authorities continued the policy of the gradual nominal depreciation of the sum, which has been slower than that of most major trading partners.

The Central Bank of Russia has recently announced that the volume of remittances from Russia to Uzbekistan has decreased by 2.2 times over the first half of current year compared to the same period of last year, amounting up to $1.398 billion.

Fiscal policy remains prudent while the monetary policy stance is accommodative, according to the message. The fiscal outrun in 2014 registered a surplus in amount of 0.3 percent of GDP on account of higher-than-projected excise taxes and efforts to streamline recurrent spending.

By contrast, the augmented fiscal surplus, which includes the Fund for Reconstruction and Development, decreased up to 1.6 percent of GDP on account of weaker commodity revenue.

The 2015 budget foresees a deficit of 1 percent of GDP, while the budget execution through the first quarter of 2015 registered a balanced outturn, owed to spending under budget.

On the monetary policy front, the Central Bank of Uzbekistan cut its policy rate, the refinance rate, to 9 percent in January 2015. Through end-March 2015, both reserve money and broad money increased, slightly above the annual target rates.

IMF experts mention the risks posed by a weak external environment and low international energy and commodity prices, which require vigilance and appropriate macroeconomic policies.

Experts at the fund supported a looser fiscal stance in the near term, while ensuring medium-term sustainability. In this regard, executing planned expenditures and reallocating revenue over-performance to social safety nets and pro-poor spending would support growth, said the message.

Looking further ahead, the IMF welcomed the Uzbek authorities’ newly adopted industrial modernization program. The IMF also recommended establishing a credible medium-term budgetary framework to better manage resource revenue and the public investment program.

The fund also urged the authorities of Uzbekistan to stand ready to tighten monetary policy if needed to contain inflationary pressures. To reduce inflation to the sustainable single digits in the medium term, the IMF considered it important to upgrade the monetary policy framework and better align it with monetary aggregates targeting, as well as manage excess liquidity in the system.

The IMF also emphasized the importance of greater exchange rate flexibility to address rising pressures on the current account, and encouraged the authorities to move gradually toward foreign exchange liberalization and eliminate exchange restrictions as appropriate.

The experts of the fund said that the banking system remains stable and well capitalized, and urged the authorities to continue to strengthen the regulatory and supervisory framework. They noted the need to relieve banks of noncore functions and to phase out directed lending in order to deepen financial intermediation.

They welcomed the authorities’ recently announced strategy to strengthen corporate governance and accelerate privatization, and looked forward to its effective implementation.

Furthermore, the IMF raised its forecast for economic growth in Uzbekistan in 2015 to 6.8 percent from 6.2 percent forecasted in April 2015, according to the IMF message on September 16. It added that the GDP of Uzbekistan would grow by 7 percent in 2016.

The IMF further predicts that economy of Uzbekistan will grow by 6.7 percent in 2017 and 6.5 percent each year from 2018 to 2020.

Inflation in Uzbekistan will amount to 10.1 percent in late 2015, while the previous forecasts showed it at 9.5 percent, and will drop to 9 percent in 2016. The fund estimates that inflation in Uzbekistan will amount to 10.5 percent in 2017, and to 10 percent in 2018-2020.

The current account balance of Uzbekistan will be at 0 in 2015 and 2016, 0.2 percent of GDP in 2017, 0.3 percent in 2018, 0.4 percent in 2019 and 0.8 percent in 2020.

The nominal GDP of Uzbekistan will rise from $62.613 billion in 2014 to $89.791 billion in 2020. Nominal GDP per capita will increase from $2,046 in 2014 to $2,731 in 2020.

Gross official external reserves of Uzbekistan, according to IMF experts, will grow from $24.149 billion in 2014 to $38.131 billion in 2020.

The IMF said that the gross official external reserves of the country would exceed $24.436 billion in 2015 and $27.52 billion in 2016.

It was earlier reported that the Uzbek government plans to ensure a GDP growth of 8 percent, industrial production by 8.3 percent, agriculture by 6 percent, as well as to increase the volume of capital investments by 9.6 percent in 2015. The government plans to keep inflation within 5.5 to 6.5 percent.

In 2014 the GDP of Uzbekistan increased by 8.1 percent compared to 2013, industrial production by 8.3 percent, agriculture by 6.9 percent, and capital construction by 10.9 percent.

Uzbekistan became a member of IMF in 1992. The IMF’s representative office started operating in Uzbekistan from 1993.

---

Follow us on Twitter @AzerNewsAz