Fitch Confirms Uzbekistan's Credit Rating at 'BB-' Level
Economy
Fitch Ratings has affirmed Uzbekistan’s long-term foreign currency issuer default rating (IDR) at 'BB-' with a "Stable" outlook.
Fitch Ratings confirmed Uzbekistan’s credit rating at 'BB-', supported by the country's relatively low public debt, substantial fiscal and external buffers, sustainable GDP growth, and progress in economic reforms aimed at liberalization. However, these positive factors are balanced by a low GDP per capita, weak but improving governance, high dependence on commodities, and dollarization of the financial system.
Earlier this month, Uzbekistan's GDP figures were revised to better account for informal economic activities, resulting in an 11.8% increase in 2023 GDP. This revision, conducted in cooperation with the IMF, mainly affected construction activities and restaurant services. Despite the improvement in the 2023 budget deficit position by 0.5% of GDP due to nominal GDP growth, Fitch understands that the government does not intend to ease planned fiscal adjustments.
The consolidated fiscal deficit increased by 0.1% of GDP year-on-year in the first half of 2024, following a 2.5 percentage point shortfall in 2023. Fitch forecasts an improvement in fiscal balance in the second half of 2024, with a full-year deficit of 4.2% of GDP (down from 4.9% in 2023). The agency expects the deficit to decrease to 3.4% of GDP in 2025, partly due to energy tariff liberalization in May 2024 and the compensating effect of rising debt servicing costs.
Fitch forecasts that Uzbekistan’s government debt-to-GDP ratio, which increased by 2 percentage points to 32.5% in 2023, will remain mostly stable at 32.1% by the end of 2026, significantly below the 'BB' median of 53.6%. About 90% of government debt is denominated in foreign currency, but external debt has a long average maturity of 9.2 years, and 87% of this debt is concessional.
Earlier this month, Uzbekistan's GDP figures were revised to better account for informal economic activities, resulting in an 11.8% increase in 2023 GDP. This revision, conducted in cooperation with the IMF, mainly affected construction activities and restaurant services. Despite the improvement in the 2023 budget deficit position by 0.5% of GDP due to nominal GDP growth, Fitch understands that the government does not intend to ease planned fiscal adjustments.
The consolidated fiscal deficit increased by 0.1% of GDP year-on-year in the first half of 2024, following a 2.5 percentage point shortfall in 2023. Fitch forecasts an improvement in fiscal balance in the second half of 2024, with a full-year deficit of 4.2% of GDP (down from 4.9% in 2023). The agency expects the deficit to decrease to 3.4% of GDP in 2025, partly due to energy tariff liberalization in May 2024 and the compensating effect of rising debt servicing costs.
Fitch forecasts that Uzbekistan’s government debt-to-GDP ratio, which increased by 2 percentage points to 32.5% in 2023, will remain mostly stable at 32.1% by the end of 2026, significantly below the 'BB' median of 53.6%. About 90% of government debt is denominated in foreign currency, but external debt has a long average maturity of 9.2 years, and 87% of this debt is concessional.
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