Uzbekistan’s growth rate is expected to slow in 2023 as demand in the economy cools, especially in private consumption and services, according to a new flagship report from the Asian Development Bank (ADB).
In the Asian Development Outlook (ADO) April 2023, ADB projects gross domestic product (GDP) growth for Uzbekistan to be 5% in both 2023 and 2024, slightly below last year’s growth of 5.7%. Risks remain in the form of continued sanctions on the Russian Federation and how they might impact external demand for Uzbekistan’s exports.
“The Government of Uzbekistan took bold and confident steps to quickly restore and further develop the economy,” said Officer-in-Charge of ADB’s Resident Mission in Uzbekistan Enrico Pinali. “Although growth decelerated following robust recovery from the pandemic in 2021, it showed resilience and remained strong.”
Industry is expected to grow by 5.5% in 2023 and 2024, with a modest recovery in textiles, food, mining, and quarrying in response to growing demand for hydrocarbons, and high external demand, mainly from the Russian Federation, for apparel and processed food. Meanwhile, growth in services is expected to edge down to 5.5% in both years as demand reduces for food and accommodation, storage, and transportation services. Growth in private consumption and investment is projected to moderate.
Inflationary pressure is expected to persist, partly from continuing structural reforms and increasing social spending. However, average inflation is anticipated to decelerate to 11% in 2023 and 10% in 2024 as monetary policy remains tight. To help contain food inflation, the government has extended import duty exemptions for edible oils, poultry, wheat, flour, and rice to the end of 2023.
Anticipated high outlays for social protection, education, and health care will maintain fiscal deficit. Gross foreign reserves are projected to increase to $37 billion in 2023 and 2024, with a rise in gold reserves. Broad money is projected to increase by 25% in both years.
With the population growing 2% a year, Uzbekistan needs more secondary schools and higher-quality education, the report suggests. Secondary education, including vocational schools, absorbed an estimated 72.3% of public spending on education in 2022. To increase school enrollment by an additional 1.2 million students, the government needs to construct an estimated 1,961 schools or shorten school days to allow more double shifts.
The quality of secondary education is a concern. Uzbekistan still needs to conduct the Program for International Student Assessment to obtain a comparative measure of the quality of its secondary school education. To diversify the economy, Uzbekistan needs more skilled labor with science, technology, engineering, and mathematics (STEM) skills, the report highlights.