World economies
UZBEKISTAN, a secular unitary constitutional republic, located on the ancient Great Silk Road between Europe and Asia is the most populous country in Central Asia.
It gained independence after the collapse of Soviet Union in 1991 but the political system remained highly authoritarian and the government has largely maintained its Soviet-style command economy.
Subsidies, production, prices and access to foreign currency are tightly controlled by the state. The agriculture and manufacturing industries contribute 18.5 per cent and 34.4pc to the GDP. The service industry accounted for 47pc of GDP.
Uzbekistan has a strong agricultural base. Although the importance of cotton has declined significantly since the country’s independence, it still ranks the world’s second-largest exporter and fifth largest producer of cotton. Other main agricultural products included vegetables, fruits, grain, and livestock.
The country also produces silk and wool and is attempting to diversify its agriculture towards fruits and vegetables. Manufactured products include textiles, food processing, machine building, metallurgy, mining, hydrocarbon extraction, and chemicals.
The country is also rich in gold, coal, zinc, copper, tungsten, uranium, and silver, gas and oil. It is a big producer of gold and operates the largest open-pit gold mine in the world.
With the gigantic power-generation facilities of the Soviet era and an ample supply of natural gas, Uzbekistan became the largest electricity producer in Central Asia. Renewable energy constitutes more than 23pc of the country’s energy sector with hydroelectricity and solar energy having 21.4pc and 2pc share respectively.
After independence, however, the Uzbek government chose a strategy of gradual reform and import substitution, aimed in particular at achieving energy self-sufficiency. A deliberate government policy of economic diversification, export development and investment delivered results.
In an effort to improve the investment climate, the government took incremental steps to reform the business sector and address impediments to foreign investment in the country. In 2016, economic growth slowed to 6pc as estimated by the IMF while the government estimated 7.8pc growth during that year.
The rise of former prime minister Mirziyoyev to power opened up the economy. In 2017, the government devalued the official currency rate by almost 90pc, making it fully convertible at market rates.
A loosening of fiscal and monetary policies, along with price and foreign exchange liberalisation caused inflation to pick up which reached 13pc. But the country’s external position remains strong.
At the same time, growth of domestic employment remained below 1pc and unemployment rate was steady at 4.9pc. The Central Bank of Uzbekistan expects the economic growth between 5.5-6pc in 2018 and 2019. The ADB predicts Uzbek economy to grow by 5.6pc in 2018 and 2019.
For 2018, the authorities plan to restrain additional on-lending operations and save about half of the expected additional revenue from improved tax administration while adjusting social safety net spending and public wages for actual inflation. If firmly implemented, these measures would reduce the augmented fiscal deficit in 2018 to only 1.25pc of GDP.
The Uzbek government is looking to expand opportunities for small and medium enterprises and prioritises increasing foreign direct investment. The country remains highly centralised and nationalised. Levels of corruption remain high.