Uzbekistan’s economy demonstrated a robust growth of 7.4% in real terms, with GDP rising to 734.6 trillion Soum ($69.2 billion) in 2021.  Measured in U.S. dollars, nominal GDP increased by 15.5%.  A robust 7.4% GDP expansion came primarily from the service (3.3%) and manufacturing (2.2%) sectors.  The soum, Uzbekistan’s national currency, depreciated by 3.4% against the U.S. dollar.  Uzbekistan’s international reserves grew only by $0.2 billion, reaching $35.1 billion, while external debt rose by $5.4 billion (16%).  Annual inflation remained double-digit in 2021: the GDP deflator was 13.6% and consumer price inflation was 10.8%, compared to a 2020 baseline.  The Central Bank expects 12-14% inflation in 2022 due to supply side factors and food price pressures mainly caused by the Russian invasion of Ukraine.  The key rate hike from 14% to 17% in March 2022 should help it cope with the risk of excessive inflation.   

• Key Economic Indicators: 

(Source: State Statistics Committee, the Central Bank)        

In line with a notable economic growth, Uzbekistan’s trade surged by 16%, almost returning to pre-pandemic level of 2019.  Imports increased by 20% while exports grew only by 10% - this widened the trade deficit to $5.8 billion.  Uzbekistan has continued its industrialization policy of importing new capital equipment to modernize its manufacturing sector and infrastructure, with the machinery and transport sectors accounting for 32.4% of the total volume of imports.  The export of industrial goods rocketed up 49% ($1.4 billion) in 2021 and replaced gold as the major export item.  Gold continues to be an important resource of the country, comprising 24.7% of its total exports in 2021 (38.3% in 2020).   

Major Trade Partners (Uzbekistan official statistics, 2021): 

• Russia, 17.9% 

• China, 17.7% 

• Kazakhstan, 9.3% 

• Turkey, 8.1% 

• South Korea, 4.5% 

In 2021 Uzbekistan’s trade with the United States grew from $277 million to $424.6 million, establishing the United States as Uzbekistan’s 16th largest trade partner.  Due to the relatively low volume of trade between the United States and Uzbekistan, major capital purchases, such as Uzbekistan Airways’ acquisition of U.S.-made aircraft for its fleet, can cause significant variances in bilateral trade from year to year. 

Uzbekistan’s Constitution provides for a presidential system with separation of powers and a representative government.  In practice, power is highly concentrated in the office of the president and the executive branch.  The incumbent, President Shavkat Mirziyoyev, won re-election on October 24, 2021, and will stay in power for a second five-year term.  After winning his first Presidential election in 2016, he implemented a reform program to turn Uzbekistan from a closed, isolationist country to one eager to cooperate with its neighbors, as well as regional and global powers.  The government started to implement reforms required for transition to a more transparent, competitive and market-based economy in 2017.  The Development Strategy of Uzbekistan for 2022-2026 was adopted in January 2022. 

Uzbekistan has signed bilateral agreements with 54 countries on the avoidance of double taxation.  The United States considers its 1973 U.S.-USSR tax treaty as in force regarding Uzbekistan, while the Government of Uzbekistan does not.  Uzbekistan also has treaties providing most-favored-nation treatment with 47 countries.  U.S.-Uzbekistan agreements on trade relations, including most favored nation status, and on encouraging and reciprocally protecting investment, were completed in 1994 but never ratified by the United States.  In 2014, Uzbekistan joined the CIS Free Trade Zone Agreement.  On December 11, 2020, Uzbekistan joined the Eurasian Economic Union (EAEU) as an observer.  On April 9, 2021, the European Union accepted Uzbekistan as the ninth beneficiary of a General System of Preferences Plus (GSP+) trade arrangement, which removed tariffs on two thirds (6,200 titles) of the product lines covered by GSP in return for Uzbekistan implementing 27 ratified core international conventions on human and labor rights, environmental and climate protection, and good governance.  On November 1, 2021, Uzbekistan became the first country to be admitted to the United Kingdom’s Enhanced Framework Generalized Scheme of Preferences, which allows zero import duty on more than 7,800 products made in Uzbekistan.  The country is also working on joining the World Trade Organization (WTO). 

Violent extremist groups in Central Asia, including the Islamic Movement of Uzbekistan, al-Qa’ida, and DAESH, have not represented a threat to foreign businesses in Uzbekistan in recent years.  The country has good relations with all its neighbors, including Afghanistan.  Though it has not formally recognized the Taliban government, Uzbekistan has called for Afghanistan’s assets held abroad to be unfrozen.  On February 2, 2021, Uzbekistan, Pakistan and Afghanistan signed a roadmap on construction of a planned 573-km-long Mazar-e-Sharif-Kabul-Peshawar railway and sent a joint letter to international financial institutions (IFIs) requesting a $4.8 billion loan.  However, after the Taliban’s takeover of Afghanistan in August 2021, such financing became regarded as close to impossible.  Nonetheless, the three countries are still holding talks on implementation of the project.  The railway could grant the Central Asian countries access to the Indian Ocean and significantly expand the region’s access to global markets. 

With an estimated population of 35.5 million, Uzbekistan has the foundation needed to become a regional economic powerhouse: a dynamic, literate, and entrepreneurial population – the largest in Central Asia; relatively good infrastructure; and the largest potential consumer market in the region.  Uzbekistan’s cotton industry and rich natural resources such as gold and natural gas offer attractive opportunities for investors.  The Cotton Campaign, a global human rights coalition, ended its thirteen-year boycott of Uzbek cotton in March 2022, reporting it had found no systemic or systematic government-imposed forced labor during the 2021 cotton harvest.  The government’s declared economic policy prioritizes the attraction of private investments through improvement of Uzbekistan’s business climate, privatization, and liberalization of foreign trade.  Unfortunately, external factors now add uncertainty and pose increased risk to the country’s economic outlook.  The Russian war in Ukraine has affected the political and economic landscape of the region, and the full long-term impact is yet to be understood.  For now, this has already resulted in a fall in Uzbekistan’s forecast 2022 GDP growth from 6% to 3.5-4%.  Russia and Ukraine were Uzbekistan’s largest and ninth largest trading partners in 2021.  Remittances constituted 12% of Uzbekistan’s GDP in 2021, with 70% of them coming from Russia.  Uzbekistan has also been actively attracting Russian investment capital: the largest state industrial and energy companies of Uzbekistan have signed several billion-dollar loan agreements and MOUs with Russian state banks to finance their projects in the last few years.  The status of these agreements may be at risk now that Russian aggression has triggered western sanctions on Russian banks, though as of June 22, Uzbekistan’s soum was being traded on the Moscow stock exchange. 

Fitch Ratings affirmed Uzbekistan’s outlook as stable in April 2022, while S&P and Moody’s have not updated their respective stable and positive outlooks on the country since summer 2021.  In May 2021, Deputy Prime Minister and Minister of Economic Development and Poverty Reduction Jamshid Kuchkarov declared that the government had set its goal to increase per capita GDP from the current $1,700 to $2,500 by 2025, and $4,200 by 2030.