World Bank: Uzbekistan’s economy grew by 5.5% in 2023

The World Bank has announced the next issue of the “Prospects of World Economic Development” report.

According to the report, economic growth in Europe and Central Asia increased from 1.2 percent in 2022 to 2.7% in 2023. The acceleration of growth was attributed to the expansion of domestic demand, a stable situation in the labor market and renewed growth in Russia and Ukraine.

However, excluding Russia, Ukraine and Turkey, economic growth in the ECA region slowed significantly to 1.8% last year. In particular, the slowdown affected 78% of the region’s economies.

Due to the impact of weak external demand in the Eurozone, the decrease was significant in Central Europe (growth – 0.7%) and in the Western Balkans. Also, economic growth slowed down in the South Caucasus, but accelerated in Central Asia. In Armenia, Kyrgyzstan, and Tajikistan, remittance flows played an important role in supporting demand.

Economic growth indicators have returned to positive dynamics in Eastern Europe as well. In Ukraine, the growth rate was 4.8%. But the country’s output in 2023 remains 30% below pre-war levels.

Inflation has moderated in the region as energy and food price pressures eased, but numbers remain above targets in most countries.

Forecasts

Economic growth in the ECA region is forecast to decrease to 2.4% in 2024, and to increase to 2.7% in 2025. The main factor is the increase in private consumption and the gradual recovery of the Eurozone economy.

However, the uncertainty caused by Russia’s invasion of Ukraine will play an important role in determining the regional outlook. Excluding these two countries, the growth rate in the region may accelerate to 3.1% this year and 3.7% in 2025.

Most ECA countries are likely to continue to ease monetary policy amid lower inflation. However, banking analysts say that the expected budget consolidation will close these prospects.

Growth in the region is expected to be lower than pre-pandemic trends due to the ongoing effects of the pandemic and Russia’s invasion of Ukraine. The rate of convergence of per capita income in the ECA region is projected to be slow, with the average per capita income in 2025 being only 24% of the EU level.

Economists of the World Bank expect the GDP growth of Uzbekistan to remain at the same level of 5.5% in 2024 and 2025.

Risks

Escalation of conflict in the Middle East could lead to higher energy prices, tightening financing conditions and negative effects on confidence levels.

Geopolitical risks in the region are high, including an escalation of the conflict caused by Russia’s invasion of Ukraine, which could add to already heavy human and economic losses. In the face of higher-than-expected inflation, tighter monetary policy can be maintained for a long time.

A slower-than-expected economic recovery in the eurozone, the region’s main trading partner, will also weigh on activity in the region. In addition, a further slowdown in economic growth in China or a sharper-than-expected reduction in remittances from Russia could create negative externalities for the countries of Central Asia and the South Caucasus.

In addition, the delay in EU aid funds creates another risk affecting economic growth in Central Europe.