Country Report Uzbekistan

Outlook for 2008-09

• The president, Islam Karimov, will retain a tight grip on power following his re-election to another seven-year term in December 2007.
• Given the questions regarding Mr Karimov's health, uncertainty over who will eventually succeed him is likely to persist over the medium term.
• Human rights issues will slow an improvement in relations with the West, but ties with Russia and China will remain strong.
• Few structural reforms are expected over the forecast period, and the business environment will remain unattractive to Western investors. Investment will be more forthcoming from Russia, Asia and the Middle East.
• Earnings from commodity exports will help to support a strong budget position in 2008-09, but will keep annual inflation in double digits.
• Real GDP growth is forecast to average around 7.6% annually in 2008-09, as a result of rising exports and investment.
• The current-account surplus will average around 25% of GDP in 2008-09, boosted by high export prices.

Monthly review

• Although the third anniversary of the crackdown in Andizhan received no official acknowledgement in Uzbekistan, the incident continues to have repercussions both domestically and abroad.
• The authorities continue to pursue a particularly uncompromising approach to those suspected of Islamism.
• The refinancing rate has remained at 14%, suggesting a slightly loose monetary policy with mildly negative real interest rates.
• The IMF has welcomed an increase in the capitalisation of banks, but the low level of financial intermediation in Uzbekistan continues to restrain the development of the economy.
• The state-owned energy company, Uzbekneftegaz, has said that gas exports have recovered from diversions to domestic consumers during the harsh winter, and that they will rise by almost 9% in 2008 in volume terms.
• The government has reached a deal to export US$400m of uranium to South Korea between 2010 and 2016.
• Illicit exports of rice owing to the higher price fetched by the commodity abroad have led the authorities to implement an informal ban on exports and to require farmers to sharply raise the area allocated to the rice crop in 2008.

SOURCE: Country Report