Country Report Uzbekistan May 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 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 authorities have continued to harass opposition journalists and have demanded that defence lawyers apply for new licences, in a move that will make legal proceedings even more heavily weighted in favour of the state.
• Relations with Uzbekistan's Central Asian neighbours remain strained owing to disputes over water use, energy supplies and border demarcations. Despite a regional summit in April, no resolution of the water dispute seems close.
• Despite increased government spending to boost the economy, the state budget ran a small surplus in the first quarter of 2009. Revenue is reported to have held up well, even though tax rates have been reduced.
• The authorities are adopting a contradictory approach to monetary policy that seeks both to limit cash in circulation and to boost bank lending to finance investment.
• Real GDP growth in the first quarter of 2009 was reported at 7.9% year on year, only a slight slowdown compared with the year-earlier period. However, sectoral growth rates continue to paint a contradictory picture.
• Passenger-car production fell by 3% in the first quarter, although this was an improvement compared with January-February.
• Trade turnover rose by 8.1% year on year in the first quarter of 2009, but the trade surplus narrowed by 25% as non-energy exports performed poorly.

Source: Country Report

This report covers the following industry codes:
SIC Code: 47;65;60;37;10
NAICS Code: 48;53;52;336;212