Summary
Overall, the Uzbek economy in June 2023 continued its inflation decrease while exchange rates remained stable. Trade picked up some speed during May.
Economic Growth
The production of industrial goods in Uzbekistan grew by 5.7% in January-May 2023, compared to the same period of the previous year. This corresponds to the 6% growth rate recorded in the same period of 2022. The construction sector grew by 4.7% in January-May 2023. This represents an increase from the 3.2% growth rate recorded in the corresponding period of 2022. Retail trade turnover in Uzbekistan grew by 7.2% in January-May 2023 against the 10.1% growth rate recorded in January-May 2022. The volume of market services provided in Uzbekistan grew by 12.6% in January-May 2023. In comparison, the growth rate stood at 15,8% in the same period of 2022. The largest share of these services was accounted for by financial, transport, and trade services.
All sectors are growing at reasonably healthy rates. Additionally, it is important to note that the number of registered companies is growing suggesting that there is interest in starting businesses in the economy.
Figure 1: Sectoral Growth January-May 2023
Source: https://stat.uz/images/uploads/reliz-2023/infographic-uzb_20_06_2023.pdf
Inflation and Monetary Policy
In June, the monthly CPI stood at -0.3% and slowed down by 0.8% compared to the previous month. In the corresponding period of 2022, the monthly inflation rate was 0.9%. Compared to the beginning of the year, the general price index increased by 3.5%, which represents a significant slowdown compared to the corresponding period of 2022 (6.5%). The average monthly inflation for six months was 0.6%, and this indicator is the lowest of the last 5 years.
Figure 2: Monthly Headline and Food Products’ Inflation
Source: https://stat.uz/images/uploads/reliz-2023/narx_reliz_31_05_2023_uzb.pdf
In June, the annual inflation rate continued to slow down, as in previous months and amounted to 9.0%. For comparison, the annual inflation was 10.4 % in May, 11% in April, and 11.7% in March. The slowdown in annual inflation is mainly explained by the higher base effect in 2022, as well as the decreasing pressure of import inflation.
Figure 3: Annual Consumer Price Index (CPI)
Source: https://stat.uz/images/uploads/reliz-2023/narx_reliz_31_05_2023_uzb.pdf
On the 15th of June, the central bank decided to leave the key rate unchanged at 14% p.a. Although headline inflation has been declining for several months, core inflation is still higher than headline inflation. In particular, the core inflation rate in May was 12.4% (12.9 % for April), slightly slowing down from 13.8% in December 2022. The fact that core inflation is higher than headline inflation shows that certain inflationary risks remain in the economy. The trend of the core inflation was decisive for keeping the main rate unchanged.
This year, the central bank targets annual inflation in the range of 8.5-9.5% as a target indicator. But by June, inflation seems to be falling faster than the central bank’s expectations. In particular, in June, the annual inflation stood at 9.0 %, making the historically low rate that has not been observed since August 2016. This kind of slowdown of the annual inflation will create a foundation for lowering the key rate in the upcoming meetings of the central bank.
International Reserves
By the 1st of June, Uzbekistan’s gold and foreign exchange reserves amounted to nearly $34.37 billion according to Central Bank. The current level of international reserves in Uzbekistan is well above the levels recommended by international organizations, such as the IMF. In fact, the reserves are sufficient to cover
13.6 months of imports, which is significantly higher than the level of reserves on average in the world and neighboring countries.
UZS Exchange Rates Evolution
Figure 4: Main Currencies Evolution against the UZS in May and June 2023 (Nominal Exchange Rates)
1st of May normalized to 100; increases = depreciation of the UZS; Source: own elaboration based on Central Bank data
The UZS remained overall stable regarding the US dollar during May and June 2023. Only at the end of the period, it depreciated slightly by 1% (Figure 4). The UZS appreciated by over 2% against the Euro during May, stopping its previous depreciation tendency. However, it depreciated again during June, ultimately finishing the period at almost the same exchange rate as on the 1st of May.
At the beginning of May, the UZS depreciated by over 7% against the Russian Ruble but later appreciated again, returning to its value at the start of May at the end of the month. During June, the UZS continued appreciating against the Ruble – in line with the appreciation tendency against the Ruble observed since mid-2022. At the end of June, the UZS had appreciated by more than 4% against the Ruble compared to the 1st of May. The UZS depreciated by about 1% against the Kazakh Tenge over May and stayed at this new value during June. The Tenge continues its recuperation from last year’s dip after Russia’s invasion of Ukraine. May 2023 is the first month since the invasion that the Kazakh Tenge quoted consistently higher than its value at the beginning of February 2022 in relation to the UZS. The Kyrgyzstan Som and the Tajikistan Somoni moved in unison with the US dollar.[1]
The UZS continued its appreciation against the Turkish Lira in May. The appreciation accelerated further during June, resulting at the end of June in an appreciation of almost 25% compared to the 1st of May value. This is due to the continuously high inflation in Turkey, devaluating the Lira. Furthermore, the Turkish central bank stopped using reserves to defend the Lira after the presidential election at the end of May.
International Trade
During January-May of 2023, Uzbekistan’s external trade turnover amounted to $25.8 billion, an increase of 25.4% compared to the same period of the previous year. The export value reached $10.5 billion, while the import value stood at $15.3 billion. Export and import growth rates were 24.1% and 26.4% respectively. The negative trade balance amounted to $4.8 billion in the first five months of this year. In the corresponding period of 2022, the trade deficit was $3.6 billion.
Figure 5: Export and Import Growth Compared to the Same Month of the Previous Year
Source: https://stat.uz/images/uploads/reliz-2023/tashqi-savdo_20_06_2023_uzbbbs.pdf
In May, the monthly export of goods and services amounted to $2.8 billion, showing an increase of 2.3 times compared to the same period of the previous year. The main driver behind this growth was gold export, which accounted for $1.3 billion or 46 % of total monthly export in May. Non-gold exports also showed a relatively high growth rate compared to the previous months of 2023. Specifically, the growth rate of non-gold exports reached 22% in May.
In May, monthly imports amounted to $3.4 billion, showing a 64% increase compared to the corresponding period of the previous year. It is worth noting that the growth rate of imports in May significantly surpassed the growth rates observed in the previous months of the current year.
Figure 6: Daily Gold Price (USD/t.oz) Evolution in May 2023
Source: https://www.gold.org/goldhub/data/gold-prices
Among individual countries, exports to China have started to grow again after 10 consecutive months of decline. In particular, monthly exports to China increased by 15% in May. Monthly exports to Russia have been decreasing for the third month in a row. In May, monthly exports to Russia decreased by 11%. This situation is explained by the high base effect in 2022, as well as the increased concern about secondary sanctions. Monthly exports to Turkey, which is our main trading partner, continue to decrease. In May, monthly exports to Turkey decreased by 47%.
The export to Kyrgyzstan has been decreasing for the third month (in May, the monthly export decrease was 15%), while the monthly export to Kazakhstan has started to increase again after the reduction in April. The latter increased by 22% in May. Monthly exports to Tajikistan increased by 81% in May. In comparison, monthly export growth to Tajikistan in April and March was 41% and 46 % respectively.
Figure 7: Export Growth Compared to the Same Month of the Previous Year for Main Export Markets
Source: https://stat.uz/images/uploads/reliz-2023/tashqi-savdo_20_06_2023_uzbbbs.pdf
Imports from almost all of our main trading partners are growing. In particular, in May, imports from China increased by 110 % while imports from Russia, Kazakhstan, and Turkey increased by 59%, 19%, and 21%, respectively.
Comparison to Other Countries
Table 1: Inflation and Trade in Selected Countries in May 2023
| Countries | Inflation | Import | Export | |||
| monthly | annual | nominal (billion dollars) | growth | nominal (billion dollars) | growth | |
| Armenia | -1,8% | 5,2% | 3.6* | 94% | 2.2* | 109% |
| Belarus | -0.3% | 3.7% | 17.4 | 14% | 16.0 | 21% |
| China | -0.2% | 0.2% | 1040 | -6,7% | 1400 | 0.3% |
| Kazakhstan | 0.6% | 15.9% | 18.9* | 40.5% | 25.5* | -3.8% |
| Kyrgyz Republic | 0.9% | 11.3% | 3.2* | 27% | 0.6* | 19% |
| Russian Federation | 0.3% | 2.5% | – | – | – | – |
| Turkey | 0.04% | 39.7% | 158.5 | 8.8% | 102.4 | 0.1% |
| Uzbekistan | 0.5% | 10.4% | 20.58 | 25.4% | 12.11 | 26.4% |
*January-April Source: statistical agencies of selected countries
Among our primary trading partners, Kazakhstan (0.6%) and Kyrgyz Republic (0.9%) exhibit higher monthly inflation rates than Uzbekistan. Annual inflation rates were also higher in the Turkey (39.7%), Kyrgyz Republic (11.3%), and Kazakhstan (15.9%) than in Uzbekistan, while remaining relatively low in other selected countries.
Moreover, among the selected countries, Armenia (94%), Kazakhstan (40.5%), and Kyrgyzstan (27%) have recorded a significant increase in import growth. This trend can be attributed to the sharp increase in re-exports to Russia.
Fiscal Policies
The Tax Committee announced that the amount of penalties accrued on overdue receivables from foreign economic operations of business entities will be written off. Judicial and enforcement proceedings related to the collection of these penalties will be terminated from the 1st of June, 2023. The maturity of receivables from foreign trade operations will be recalculated.
Announced Investment Projects
During 2023, the government of Azerbaijan will allocate $125 million from its budget to form the authorized capital of investment funds created jointly with Uzbekistan and Kyrgyzstan the portal “Haqqin.az” informed. A number of projects in the oil and gas industry, car assembly and in the development of transport communications from Uzbekistan to the Caspian Sea will be developed in coordination with other states of Central Asia. The agreement on the establishment of a joint investment fund between Azerbaijan and Uzbekistan was signed on February 24, 2023. The upper limit of the authorized capital of the fund are $500 million. The share of Azerbaijan in the joint capital will be 75%, Uzbekistan 25%.
Announced and Enacted Reforms
04.07.2023. A new law on competition introduces new institutions such as antitrust compliance and superior bargaining power. This law will help to promote fair competition in the Uzbek economy and protect consumers from unfair practices.
29.06.2023. The introduction of electronic contracts for natural gas and electricity.
26.06.2023. Tourism: Shavkat Mirziyoyev, the President of the Republic of Uzbekistan, proposed during his election campaign a number of measures to increase tourism in Uzbekistan, including refunding the value-added tax for foreign tourists at all international airports, giving tour operators a full refund of value-added tax, and creating convenient driving conditions for tour operators.
24.06.2023. The allocation of funds to mahallas (neighborhood communities) in Karakalpakstan. This will help to improve the provision of essential services and social infrastructure in these communities.
23.06.2023. Shavkat Mirziyoyev, the President of the Republic of Uzbekistan, announced during his election campaign plans to increase support for compatriots abroad. These plans include:
- Extending the term of entry visas from 1 to 3 years and reducing state fees by 3 times.
- Eliminating the license requirement for working in Uzbekistan and simplifying the procedure for permanent residence.
- Introducing a “Compatriot’s certificate” that will give compatriots the same rights as citizens of Uzbekistan.
- Reimbursing the expenses of obtaining a travel ticket and a “working visa” for compatriots who are looking for high-paying jobs abroad.
- Expanding the scope of health and life insurance for compatriots.
- Opening centers provide compatriots abroad free legal, material, and social assistance.
- Establishing “call centers” to help compatriots get help from the government.
22.06.2023. The President of the Republic of Uzbekistan, Shavkat Mirziyoyev, promised during his election campaign to adopt a program for the development of the Bukhara region, which will include investments of up to $27 billion in the next seven years. The program will focus on increasing industrial production, developing tourism, and promoting agriculture.
21.06.2023. Uzbekistan plans to increase copper, gold, silver, and uranium production twofold in the next seven years.
17.06.2023. A significant reduction in customs fees for certain categories of cars. This will make it more affordable for people to buy cars.
15.06.2023 The President of the Republic of Uzbekistan, Shavkat Mirziyoyev, has announced plans to invest an additional $1 billion in the country’s automotive industry. This investment is expected to help Uzbekistan increase car production from 300,000 units to 500,000 units in the next two years. By 2030, Uzbekistan aims to produce 1 million cars a year.
13.06.2023. A reduction in taxes for entrepreneurs in Karakalpakstan. This will help to stimulate investment and job creation in the region.
06.06.2023. New transport infrastructure: constructing a new high-speed highway on the Tashkent-Samarkand route.
[1] Turkmenistan has a fixed exchange rate to the US dollar which did not change in May.