Uzbekistan's economy demonstrates resilience to the aftermath of hostilities in Ukraine - Fitch
Economy
According to the international rating agency, the government plans to restart the electricity tariff reform, which was postponed until May 2023. Successful implementation of this reform will have a positive impact on public finances in the long term.
The international rating agency Fitch Ratings has confirmed the long-term credit rating of Uzbekistan in foreign currency with a stable outlook at the level of “BB -”. This is stated on the official website of the agency.
It is noted that the rating of Uzbekistan takes into account, on the one hand, good external and fiscal buffers, a low level of public debt, as well as a high history of GDP growth compared to other countries with a similar rating. On the other hand, there is “high reliance on the commodity sector and structural weaknesses on the part of gross domestic product per capita, significant non-competitive state participation in the economy, although it is declining, and governance standards that are still considered weak if improved.”
“In order to stimulate competition in the economy, the government of Uzbekistan is implementing major structural economic reforms, including the privatization of state-owned enterprises and a further reduction in concessional lending. The government plans to resume the electricity tariff reform, which was postponed to May 2023. The successful implementation of this reform will have a positive impact on public finances in the long term and reduce the risk of contingent liabilities of public distribution power plants,” the report says.
It is noted that at present the national economy is demonstrating resilience to the consequences of military operations in Ukraine and sanctions against Russia, and Uzbekistan's banks are monitoring compliance with Western sanctions. In order to avoid secondary sanctions, the government of Uzbekistan will continue close trade relations with Russia, while maintaining strong ties with Western countries.
“In July, President Shavkat Mirziyoyev won a snap election held in accordance with the new version of the Constitution, which extends the presidential term from 5 to 7 years. Uzbekistan has improved its governance indicators in accordance with the World Bank’s interpretation by improving the quality of regulation and the effectiveness of government,” - experts say.
He also expects an annual budget deficit of 5.1 percent on a downward revision (despite a 3 percent deficit planned for 2023 by law). This figure is projected to fall to 4.3 percent in 2024 and 3.4 percent in 2025, given expectations for the rationalization of more targeted social spending and subsidies.
Fitch expects the current account deficit to widen to 4.8% in 2023 (due to the normalization of remittances from citizens working abroad and a worsening trade deficit) and to average 4.7% in 2024-2025. He also predicts total government gross debt (including government external guarantees) to stabilize at just over 37 percent of GDP between 2023 and 2025.
“The longer a large-scale reform of electricity subsidies is delayed, the slower the budget deficit is shrinking,” analysts at the agency said.
The organization noted good growth prospects for Uzbekistan, reporting that real annual economic growth in the first half of the year was 5.6 percent (5.7 percent in 2022).
It is noted that the rating of Uzbekistan takes into account, on the one hand, good external and fiscal buffers, a low level of public debt, as well as a high history of GDP growth compared to other countries with a similar rating. On the other hand, there is “high reliance on the commodity sector and structural weaknesses on the part of gross domestic product per capita, significant non-competitive state participation in the economy, although it is declining, and governance standards that are still considered weak if improved.”
“In order to stimulate competition in the economy, the government of Uzbekistan is implementing major structural economic reforms, including the privatization of state-owned enterprises and a further reduction in concessional lending. The government plans to resume the electricity tariff reform, which was postponed to May 2023. The successful implementation of this reform will have a positive impact on public finances in the long term and reduce the risk of contingent liabilities of public distribution power plants,” the report says.
It is noted that at present the national economy is demonstrating resilience to the consequences of military operations in Ukraine and sanctions against Russia, and Uzbekistan's banks are monitoring compliance with Western sanctions. In order to avoid secondary sanctions, the government of Uzbekistan will continue close trade relations with Russia, while maintaining strong ties with Western countries.
“In July, President Shavkat Mirziyoyev won a snap election held in accordance with the new version of the Constitution, which extends the presidential term from 5 to 7 years. Uzbekistan has improved its governance indicators in accordance with the World Bank’s interpretation by improving the quality of regulation and the effectiveness of government,” - experts say.
He also expects an annual budget deficit of 5.1 percent on a downward revision (despite a 3 percent deficit planned for 2023 by law). This figure is projected to fall to 4.3 percent in 2024 and 3.4 percent in 2025, given expectations for the rationalization of more targeted social spending and subsidies.
Fitch expects the current account deficit to widen to 4.8% in 2023 (due to the normalization of remittances from citizens working abroad and a worsening trade deficit) and to average 4.7% in 2024-2025. He also predicts total government gross debt (including government external guarantees) to stabilize at just over 37 percent of GDP between 2023 and 2025.
“The longer a large-scale reform of electricity subsidies is delayed, the slower the budget deficit is shrinking,” analysts at the agency said.
The organization noted good growth prospects for Uzbekistan, reporting that real annual economic growth in the first half of the year was 5.6 percent (5.7 percent in 2022).
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