Country Report Uzbekistan July 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 and remittances. The Economist Intelligence Unit 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 14% 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 expected to decline to around 15% of GDP in 2009-10 as import demand falls in Russia, Uzbekistan's chief export market, and as remittance inflows decline.

Monthly review

• The 20th anniversary of Mr Karimov's accession to power highlights the lack of clarity as to what will happen should his health fail. There is no clear successor and no institutional underpinning for a stable succession.
• Human Rights Watch, a US-based non-governmental organisation (NGO) has aired its concerns over the lack of civic freedoms in Uzbekistan, and called on the EU to urge Uzbekistan to make greater progress in this area.
• The IMF has issued cautious praise for Uzbek economic policies, although the fact that Uzbekistan is seeking external approval for its approach indicates a concern that it may require outside help to support the economy.
• Official data continue to cast doubt on economic performance. Despite officially reported GDP growth of 7.9% in the first quarter, declining power output suggests that the industrial sector is more sluggish than reported.
• Output in the energy and automotives sectors??