At the end of January, President Islam Karimov reported 2009 macroeconomic results to the Cabinet of Ministers. In the address, Karimov reported that GDP grew 8.1% in 2009, based on a 9.0% expansion in industrial production. Additionally, retail turnover was reported to have surged ahead by 16.6% and paid services increased 12.9%. While agricultural production was reported to have increased, the improvement of 5.7% was below that of the economy as a whole. Various anti-crisis measures were initiated by the government in 2009, including the implementation of greater import protection for the already sheltered Uzbek economy. Other actions that the government claimed to have taken were the diversification of the economy, modernisation of production, and widespread capital expansion. These efforts were said to have also helped buoy exports by 2.4% in 2009, despite the drop of global demand. In addition, Karimov took credit for the creation of 940,000 new jobs over the course of the year. Despite the government actions to protect the economy, Karimov claimed that the budget remained in surplus for 2009 as a whole. While economic growth remained robust, the president claimed that inflation came in below official targets, at just 7.4%.

In 2010, Karimov is planning for GDP expansion of 8.3%, inclusive of an 8.5% rise in exports. Further industrial modernisation is planned, using an anticipated influx of capital. In all, the president is calling for total investment activity to grow to 30% of GDP.

Outlook and Implications

Uzbek macroeconomic data is heavily guarded and released only sporadically. Moreover, the data is put out much as this data was, though official proclamations by top Uzbek officials. The data that they report is undoubtedly heavily manipulated to maximise political effect. Thus, IHS Global Insight views this 2009 data with a sceptical eye. However, barring any other possible report for economic conditions within the country, this data is what we will have to base our analysis and forecasting on. As such, we first believe that GDP growth rate was actually slower than the reported 8.1%. While we do anticipate that the economy expanded thanks to an influx of foreign investment that has continued to grow as the Uzbek government slowly reforms its regulations to become more hospitable to potential inflows, we would estimate that the economy grew closer to the 5% range. As for booming retail trade and services, these are likely to have been artificially inflated by the Uzbek authorities' ongoing efforts to bring more economic activity into the official economy, limiting the still sprawling shadow market. Likewise, official inflation data may be technically true, but official inflation reports omit the soaring prices in the black market. Official inflation is artificially kept low by administrative price checks. The hardest to believe data for 2009 is the report that the budget is in the black. Huge spending, enormous graft, and countless off-budget activity likely has the Uzbek government in much more difficult straits than it otherwise lets on.

In 2010, we do indeed expect that GDP growth will remain elevated. In fact, given the rebound in the global economy, 8% or so expansion is much more realistic this year than it was last year. Similarly, ample investment activity will continue, as global investors continue to come to the country as the government better guarantees their rights and the state is proactive in setting up joint projects. Economic indicators will continue to be closely guarded by top officials, with any released data sure to be continued to be manipulated.

Global Insight (Reino Unido)