Country Report Uzbekistan October 2009

Outlook for 2010-11

• 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 will encourage Uzbekistan to attempt to foster closer economic links with the West. However, economic ties with Russia and China will also remain strong.
• Real GDP growth will pick up over the forecast period, owing to an expected rebound in export sectors. The Economist Intelligence Unit forecasts real GDP growth of 7% in 2010 and a further rise, to 8.2%, in 2011.
• Inflation is forecast to rise from an estimated annual average of 8.6% in 2009, owing to higher global commodity prices and robust money supply growth, as the government increases wages and benefits.
• The current-account surplus is expected to fall to around 13% of GDP in 2010 and to 9.4% of GDP in 2011. Imports will rise more rapidly than exports, owing to robust consumer demand.

Monthly review

• Uzbek militants operating in Afghanistan and Pakistan have suffered setbacks as a result of increased US military activity. This will hamper their ability to co-ordinate attacks within Uzbekistan.
• EU calls for Uzbekistan to improve its human rights record have been rebuffed. The importance to the West of Uzbekistan as a route for supplying troops in Afghanistan makes it less vulnerable to outside interference.
• A shortage of foreign exchange has led to the emergence of a dual exchange rate, and to a rapid depreciation of the official exchange rate. In response, the Central Bank of Uzbekistan is trying to limit the supply of som in circulation.
• Uzbekistan has received promises of funding from the Asian Development Bank (ADB) to finance infrastructure projects??