Country Report Uzbekistan February 2009

Outlook for 2009-10

• The president, Islam Karimov, will retain a tight grip on power, with few prospects for democratisation or increased transparency.
• There are questions regarding Mr Karimov's health, and uncertainty over who will eventually succeed him is likely to persist.
• The relaxation of EU sanctions in October 2008 will encourage Uzbekistan to attempt to foster closer economic links with the West. However, ties with Russia and China will also remain strong.
• Real GDP growth will moderate over the forecast period, owing to a decline in export demand. The Economist Intelligence Unit now forecasts real GDP growth of 2.5% in 2009, ahead of a pick-up to 3.5% in 2010.
• Inflation is forecast to slow from an estimated annual average of 12% in 2008, owing to lower import prices for food and fuel, but the extent of disinflation will be limited by rapid growth of the money supply.
• The current-account surplus is now expected to average just over 17% of GDP in 2009-10, as import demand falls in Russia, Uzbekistan's chief export market, and as prices for Uzbek cotton and gold exports fall.

Monthly review

• Following a visit to Uzbekistan by the Russian president, Dmitry Medvedev, relations with Russia now seem on a firmer footing than had been implied by Uzbekistan's withdrawal from the Eurasian Economic Community (Eurasec).
• There are grounds to suggest that Uzbekistan's foreign policy stance is becoming more multilateral, given that it shares the concerns of the EU and the US over terrorist activity and the situation in neighbouring Afghanistan.
• Uzbekistan's relations with the IMF have become more co-operative. A Fund mission to the country in late 2008 was complimentary about the government's policy mix.
• Despite its optimism concerning the prospects for economic growth in 2009, the government has been at pains to introduce concessionary tax regimes and financial support for key exporters.
• The government's plans to maintain economic growth are based on investment by state-owned firms, with such firms to finance investment from their own balance sheets, amounting to over US$1bn in 2009.
• Uncertainty still surrounds the price that Uzbekistan will earn for its gas exports in 2009. Nevertheless, it has agreed significant price rises with Russia, the Kyrgyz Republic and Tajikistan for at least the first quarter of the year.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;47;80
NAICS Code: 22;48;62