TASHKENT

Uzbekistan expects that annual inflation will slow down to 8-9 percent this year,  one of the lowest rates in recent years in the populous Central Asian country, the central bank said in a report.

According to the central bank forecast, Uzbekistan’s gross domestic product (GDP) will grow by 5.5-6.5 percent, down from a 7.4 percent growth last year.

In 2021, annual inflation was 10 percent. In January this year, consumer prices rose by 9.8 percent year-on-year compared to 11.6 percent in January 2021. On monthly basis, goods and services rose by 0.9 percent on average, food products – by 1.3 percent, non-food products  – by 0.5 percent, services – by 0.7 percent.

The bank said that the main factor in the formation of the inflationary environment last year was a significant increase in food prices, fuel and energy products, which also could be explained by global inflationary trends, and other factors related to competition and supply for the domestic market. The core inflation rate in 2021 slowed to 8.8 percent, the lowest in five years.

Factors to keep annual inflation within the forecast will be “moderately tight” monetary conditions, an increase in the credit balance in proportion to nominal GDP growth, measures to reduce the overall fiscal deficit to 3 percent of GDP, as well as improved conditions for competition and government efforts to reduce non-monetary factors of inflation.

In addition, there were also risks of going beyond the predicted inflation limits, the factors related to the size of aggregate supply and demand, as well as the impact on inflation, the spread of the omicron strain of COVID-19, and the subsequent development of the pandemic.

The bank expects that the accelerated vaccination process can serve to prevent the tightening of quarantine measures, however, the slowdown in cross-border supplies in partner countries may lead to higher prices for some goods.

Market regulation measures in 2021, export quotas and duties, pre-set sales prices, and supply chain disruptions in China, Uzbekistan’s one of the main trade partners, have played a major role in pricing, rising producer and raw material prices along with high shipping rates may also be among the factors driving inflation in 2022.

High inflation rates that Uzbekistan’s main partner countries witnessed in 2021 and expectations that this situation will continue in 2022, will put pressure on domestic prices, the bank said.

In January, the central bank kept its main rate unchanged at 14 percent to reach the inflation target for 2022 amid high economic growth and said it would continue its monetary policies directed at decreasing prices and encouraging savings.

The bank explained its decision by risks and uncertainties that persisted in external and domestic economic conditions despite the declining dynamics.