IMF Forecasts Strong Uzbek Growth, Urges Tighter Monetary Policy to Curb Inflation

The International Monetary Fund (IMF) has concluded its annual consultation with Uzbekistan, publishing a detailed assessment of the country's economic performance and outlook. The report highlights robust growth but underscores the need for continued policy tightening to ensure macroeconomic stability.

According to the IMF, Uzbekistan's economy demonstrated significant resilience in 2025, with real GDP expanding by 7.7%. This growth was broad-based, driven by strong consumption and investment, with particularly high rates observed in the services and construction sectors. The unemployment rate fell by 0.7 percentage points to 4.8%.

Inflation, measured by the consumer price index, decelerated to 7.3% year-on-year by the end of 2025, down from 9.8% a year earlier. This slowdown was attributed to fading effects of energy price hikes from mid-2024, a 6.9% appreciation of the Uzbek sum against the US dollar, and tight monetary policy. The current account deficit narrowed to 3.9% of GDP, supported by strong exports and substantial remittance inflows.

Looking ahead, the IMF projects economic growth of 6.8% in 2026, fueled by ongoing reforms, sustained investment, high remittances, and elevated gold prices. Growth is expected to moderate slightly to around 6% by 2027 as domestic demand eases.

The IMF warns that inflation is likely to remain above the Central Bank's 5% target in 2026 due partly to high global oil prices linked to Middle East tensions.

The Fund identifies several risks on the horizon. External risks include heightened geopolitical tensions, trade disruptions, commodity price volatility, and global economic uncertainty. Domestically, risks stem from potential pro-cyclical spending increases and contingent liabilities from state-owned enterprises and public-private partnerships.

On fiscal policy, while commending last year's lower-than-targeted budget deficit (2.1% of GDP), the IMF advises against increasing expenditures during budget execution in 2026 even if revenues overperform. It recommends introducing an upper limit on non-resource primary deficits starting with the 2027 budget for better management of volatile resource revenues.

The monetary policy stance receives qualified support. The IMF backs the Central Bank's decision since March 2025 to maintain its key rate at 14%, ensuring positive real interest rates.

However, noting that disinflation has recently slowed and core inflation rose to 6.3% as of February this year, it recommends further tightening if inflation reduction does not resume promptly.

A key priority outlined is accelerating reforms in state-owned commercial banks through privatization and asset quality reviews aligned with international standards.

The report also calls for structural reforms: privatizing profitable state enterprises in competitive sectors; enacting whistleblower protection legislation; improving female labor force participation; integrating climate goals into public investment; and strengthening anti-monopoly regulation ahead of WTO accession.