Customers in front of a market hall in Uzbekistan

Economic situation On the path to becoming a market economy

Even now, 30 years after gaining independence, Uzbekistan is still going through a transition from the former Soviet-style planned economy to a market economy. For a long time, the state's economic and investment plans were aimed at remaining largely independent of foreign influence. As a result, economic liberalisation, privatisation and structural reforms progressed only slowly.

Strong dependence on Russia

According to official figures, Uzbekistan's economy has grown steadily by at least five per cent in recent years. Moderate growth in times of the 2020 COVID-19 pandemic (1.9 per cent) was followed by a strong upswing in 2021 (7.4 per cent). The International Monetary Fund (IMF) is predicting economic growth of around five per cent for 2022 and subsequent years.

The Uzbek economy is strongly dependent on world market prices for its main exports (gas, metals, cotton) and the economic health of its major trading partners, China and Russia. Russia's war of aggression against Ukraine is having a major impact on Uzbekistan: Food and transportation costs are going up, exports to Russia are declining, and so are remittances from Uzbek migrant workers in Russia (see also: Social situation).

In order to mitigate inflation, the government introduced price controls, suspended import duties on basic foodstuffs, increased the minimum wage and set up a crisis response fund for Uzbek companies.

Comprehensive reforms

The economy is at the centre of Uzbekistan’s reform policies. In the past few years, the government has initiated different measures to improve the investment climate, increase competitiveness and create jobs. These measures included the relaxation of exchange rate policies, reforms of taxation and customs duties, and the gradual privatisation of state-owned companies.

Yet the general environment for private sector activity remains difficult. Potential investors are deterred by the continued strong presence of the state in many economic sectors, lengthy approval procedures, lack of legal certainty and inadequate infrastructure.

Widespread corruption is another major problem. Although Uzbekistan has steadily improved its ranking on the Corruption Perceptions Index (CPI) of the non-governmental organisation Transparency International over the past 10 years, it is still in the lower third of the list, ranking 140th out of 180 countries evaluated (2021).

Development potential

Thanks to its central geographical position and its mineral deposits (including gold, copper, uranium, coal and natural gas), Uzbekistan has good potential for development. The fuel industry, mechanical engineering, metal processing, transport manufacturing and electrical engineering are key pillars of the Uzbek economy. The textile industry, electricity sector, and the mobile telecommunications industry also offer potential for development. For foreign investors, the country can serve as a bridge for the entire Central Asian market.

The country’s young population can be regarded as another asset. If educational opportunities are improved, the Uzbek economy will be able to draw on a plentiful supply of relatively well-trained labour.

As at: 27/02/2023