“Fitch Ratings” predicts a slowdown in Uzbekistan's economic growth
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02 April 2022 7107
“Fitch Ratings” lowered Uzbekistan’s real economic growth forecast to 3.1% this year and assigned Uzbekistan a sovereign credit rating of VV (stable expectation). The press service under the Ministry of Finance reported this with reference to the agency’s message published yesterday, 1 April.
The report notes that the country’s strong external and fiscal reserves, moderate level of state debt, and high growth rates, compared to countries involved in the BB rating are among the factors that support the country’s sovereign credit rating.
However, a country’s dependence on raw materials, weak institutional and managerial quality, high inflation and low per capita gross domestic product (GDP) are described as limiting factors in a country’s credit rating.
It is noted that the current global situation will lead to a slowdown in economic growth in Uzbekistan, an increase in the current account deficit and inflation in 2022-2023. According to the agency’s updated forecast, the real growth rate of the Uzbek economy this year will be 3.1%. This forecast is explained with:
- reduced household consumption due to reduced remittances;
- delays in investment projects;
- tightening of external borrowing conditions;
- further devaluation of the currency;
- higher inflation expectations.
According to the agency, inflation will amount to an average of 12.7% in 2022 due to currency depreciation, rising inflation expectations and food prices. Although inflation was foretold at an average of 11.6% for 2023, inflation dynamics has been affected by exchange rate fluctuations, liberalization of gas and electricity tariffs, and stability of non-food and service prices.
According to “Fitch”, Uzbekistan’s sovereign credit rating and expectations can be raised in the following cases:
- achieving high economic growth while maintaining macroeconomic stability and narrowing the gap between GDP per capita and the countries rated «BB»
- significant improvement in standards of governance such as «rule of law», «public opinion and accountability», «quality of regulation» and «fight against corruption»;
- significant increase in fiscal and external reserves.
Uzbekistan’s sovereign credit rating may be lowered in the following cases:
- deterioration of external financial indicators, an increase in the current account deficit due to a steady decline in remittances, an increase in the foreign trade deficit and a decrease in the net volume of foreign direct investment, a significant reduction in international reserves or a rapid increase in external liabilities;
- a regular slowdown in economic grow, a sharp increase in the ratio of state debt to GDP, or a reduction in sovereign fiscal reserves due to government contingent liabilities.
The report notes that the country’s strong external and fiscal reserves, moderate level of state debt, and high growth rates, compared to countries involved in the BB rating are among the factors that support the country’s sovereign credit rating.
However, a country’s dependence on raw materials, weak institutional and managerial quality, high inflation and low per capita gross domestic product (GDP) are described as limiting factors in a country’s credit rating.
It is noted that the current global situation will lead to a slowdown in economic growth in Uzbekistan, an increase in the current account deficit and inflation in 2022-2023. According to the agency’s updated forecast, the real growth rate of the Uzbek economy this year will be 3.1%. This forecast is explained with:
- reduced household consumption due to reduced remittances;
- delays in investment projects;
- tightening of external borrowing conditions;
- further devaluation of the currency;
- higher inflation expectations.
According to the agency, inflation will amount to an average of 12.7% in 2022 due to currency depreciation, rising inflation expectations and food prices. Although inflation was foretold at an average of 11.6% for 2023, inflation dynamics has been affected by exchange rate fluctuations, liberalization of gas and electricity tariffs, and stability of non-food and service prices.
According to “Fitch”, Uzbekistan’s sovereign credit rating and expectations can be raised in the following cases:
- achieving high economic growth while maintaining macroeconomic stability and narrowing the gap between GDP per capita and the countries rated «BB»
- significant improvement in standards of governance such as «rule of law», «public opinion and accountability», «quality of regulation» and «fight against corruption»;
- significant increase in fiscal and external reserves.
Uzbekistan’s sovereign credit rating may be lowered in the following cases:
- deterioration of external financial indicators, an increase in the current account deficit due to a steady decline in remittances, an increase in the foreign trade deficit and a decrease in the net volume of foreign direct investment, a significant reduction in international reserves or a rapid increase in external liabilities;
- a regular slowdown in economic grow, a sharp increase in the ratio of state debt to GDP, or a reduction in sovereign fiscal reserves due to government contingent liabilities.
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