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ADB: Uzbekistan Outlook for 2012

Growth accelerated in 2011, driven by net exports, state-led investments, and remittances. With lower non-oil commodity prices in 2012, economic growth will be sustained by public investment and increasing foreign investment. The key downside risk is a deteriorating economic environment in the euro 20 and the Russian Federation. To reduce risks from reliance on commodity exports, the economy needs to diversify beyond the natural resources sectors and expand the private sector.

Uzbekistan’s strong economic performance continued in 2011 with GDP growth of 8.3% (Figure 3.8.1). As in previous years, industry (including construction) and services were the main contributors to GDP growth, with estimated growth rates of 6.7% and 12.7%, respectively. Industrial growth declined to 6.7% from 8.3% in 2010, mainly due to a slowdown in the fuel subsector, where a decline in natural gas output kept growth to 0.3%. Nevertheless, all subsectors grew collectively by 11.9%, in particular machinery and equipment, chemicals and petrochemicals, construction materials, and the food industry, reflecting strong external demand for metals and petrochemicals and continued industrial development. Construction grew by 8.5%, reflecting higher public construction, which offset a slowdown in foreign investment-related construction activities.

As in 2010, services were again a main source of growth, with retail trade, communications, and financial services recording a combined growth rate of 22.3%, supported by strong domestic demand, in particular, rising private consumption. The agricultural sector grew by 6.6%, supported by fruit and vegetable production and livestock breeding.

GDP is forecast to grow by 8.0% in 2012 and 7.9% in 2013. Industry and services are expected to be the major contributors to economic growth. Industrial output will be supported by higher domestic lending and foreign investment, while services will be driven by higher domestic demand, especially from the public sector. Higher vegetable and fruit output should boost agriculture relative to 2011.

On the demand side, continued public investment should be a key driver. Gross fixed capital formation is forecast to rise by 9.3% in 2012 in nominal terms, with investment exceeding 30% of GDP.