Uzbekistan’s Economic Outlook: Strong Momentum, Reforms, and Rising Risks

Looking forward, the growth trajectory remains optimistic, with real GDP projected to expand at around 6 percent in 2025 and 2026.

In 2024, Uzbekistan's economy demonstrated commendable resilience and momentum, posting a real GDP growth rate of 6.5 percent, underpinned by strong domestic demand. Despite ongoing global headwinds, the country managed to narrow its external current account deficit by 2.6 percentage points, bringing it down to 5.0 percent of GDP. This improvement stemmed from a combination of strong remittances, favorable commodity prices, and the surge in non-gold exports, offsetting the impact of a one-off import spike experienced in 2023.

Looking forward, the growth trajectory remains optimistic, with real GDP projected to expand at around 6 percent in 2025 and 2026. This stability is expected to be fueled by robust private consumption, a healthy investment environment, and ongoing structural reforms. However, the external landscape is becoming increasingly uncertain. Global tariff increases, tighter financial conditions, and fluctuating commodity markets could challenge Uzbekistan's external sector and fiscal sustainability.

Fiscal Developments and Policy

A noteworthy achievement in 2024 was the reduction of the consolidated government deficit (CGD) to 3.2 percent of GDP, from a previously higher figure by 1.7 percentage points. This fiscal consolidation was primarily due to cuts in energy subsidies, better-targeted social expenditures, and sustained high gold prices, which helped mitigate a reduction in VAT revenues resulting from elevated VAT refunds.

Going forward, the government's commitment to a medium-term fiscal target of 3 percent and adhering to the $5.5 billion external borrowing ceiling for 2025 are crucial for enhancing budget credibility. Authorities are urged to resist adjusting spending in response to volatile gold prices to avoid amplifying macroeconomic cycles.

To further support development priorities, the country must mobilize revenues and rationalize expenditures. Key strategies include reforming corporate and personal income tax policies, eliminating ineffective customs exemptions, and improving tax compliance. On the expenditure side, reforms in wage structures, procurement processes, and pension systems, along with consolidation of social assistance programs, are essential to boost spending efficiency.

Significant strides have been made in fiscal institutional reforms, including adherence to budget planning cycles and the adoption of the 2025-2030 Public Financial Management Reform Strategy. However, integrating PPPs into the broader investment management framework and improving transparency around fiscal risks remain work in progress.

Monetary and Exchange Rate Policy

The Central Bank of Uzbekistan (CBU) has adopted a tight monetary stance to counteract inflation, which was reported at 10.3 percent y/y in March 2025. This elevated inflation was mainly the result of adjustments in energy tariffs and other administered prices. Despite these inflationary pressures, the CBU's proactive policy rate hikes signal a firm commitment to anchoring expectations.

Exchange rate flexibility is being promoted, with encouragement for wider fluctuation bands to better absorb shocks and support monetary transmission. The CBU's ongoing communication efforts have been acknowledged positively, and further improvements could bolster policy predictability.

Financial Sector Reform and Stability

Reforms targeting state-owned commercial banks (SOCBs) are pivotal to achieving financial stability. Emphasis is placed on commercial profitability, transparency, and privatization, with a goal to reduce state ownership in banking assets to 40 percent in alignment with the 2020–2025 banking reform strategy.

The authorities are advised to implement international regulatory standards, strengthen risk-based supervision, and align with Financial Sector Assessment Program (FSAP) recommendations. Special attention is needed to regulate the rapid growth of micro-lending, which, if unchecked, could elevate systemic risk.

Macroeconomic prudential tools introduced during 2023-24 have already shown effectiveness in moderating household credit growth. Continued monitoring, stricter regulations on foreign currency lending, and phasing out of preferential loans are required to further de-risk the sector.

Structural, Governance, and Climate Reforms

Uzbekistan's progress on economic liberalization and price reform, especially in the energy sector, has been commendable. Engagements with the WTO and regional economic partnerships are supporting trade diversification. However, state support to enterprises must become more transparent and conditional, and privatization of large SOEs should be accelerated.

On governance, Uzbekistan is making tangible strides. The adoption of the conflict-of-interest law, initiatives such as the Virtual Anti-Corruption Academy, and pending legislation on asset declaration and whistleblower protection are moving in the right direction. Transparency in procurement and anti-corruption strategies is essential for improving public service delivery.

Labor market reforms are needed to tackle low female participation, high informality, and skill mismatches. Meanwhile, Uzbekistan's climate agenda is gaining momentum through energy pricing reforms, water conservation, and reforestation efforts.

Lastly, improving the quality of statistical systems will provide a more solid foundation for data-driven policy and development planning.

Risks and Opportunities

The current environment is fraught with external risks—trade disruptions, global geopolitical tensions, and tightening financial markets. Domestically, challenges include the potential for higher fiscal deficits, pressure from contingent liabilities in SOEs and SOCBs, and policy misalignments in case reforms are delayed.

Nonetheless, opportunities abound. Speedier implementation of institutional reforms, greater capital inflows, and sustained gold prices could support stability and growth.