BAKU, Azerbaijan, Mar. 9
By Klavdiya Romakayeva - Trend:
The banking sector in Uzbekistan has remained stable throughout 2020, despite the destructive impact of COVID-19, Trend reports referring to International RAEX group (International group of rating agencies).
RAEX-Europe has confirmed the sovereign government credit ratings of Uzbekistan at ‘BB-’ (sufficient level of creditworthiness of the government) in national currency and at ‘BB-’ (sufficient level of creditworthiness of the government) in foreign currency.
The confirmation of Uzbekistan's ratings at ‘BB-’ with stable outlook reflects the acceptable level of public debt and decent economic performance amid the COVID-19 pandemic.
According to RAEX, despite the significant impact of the COVID-19 pandemic, Uzbekistan is one of the few countries able to avoid economic contraction in 2020, showing a year-end GDP growth of 1.5 percent.
"With the rollout of the vaccination, relaxation of the lockdown measures and the pick-up of economic activity we expect the growth rate of the economy to come back to its pre-pandemic levels of 5-6 percent in the medium term. Our base case scenario can however be restricted by the introduction of new lockdown measures and the issues with the rollout of the vaccines," RAEX report said.
Also, RAEX expects that the unemployment rate in Uzbekistan will decrease to 13 percent in 2021 with the pick-up of economic activity in Uzbekistan and abroad and reach the levels of 9-10 percent in subsequent periods.
Although the budget revenues remained resilient in 2020, due to the urgent need to cushion the effects of the COVID-19 pandemic Uzbekistan had to increase spending on social sphere and medical care which has contributed to the widening of the overall fiscal deficit from 2 to 5.6 percent by the end of 2020.
RAEX said provided that the coronavirus pandemic will be kept under control and additional COVID-19 expenditures will not be required, it is expected the fiscal balance to return to its pre-pandemic levels in midterm perspective.
In addition, the banking sector in Uzbekistan has remained stable throughout 2020, despite the destructive impact of COVID-19.
"We note the timeliness of the Central Bank of Uzbekistan (CBU) precautionary measures to ensure financial stability and to maintain adequate liquidity of commercial banks. The regulator makes use of REPO (repurchase agreement) and swap operations - it has reduced reserve requirements and introduced a special credit line to provide liquidity to banks for up to three years."
The CBU has implemented a set of measures in order to support the economy during the pandemic which included postponement of repayment of loans to the population and businesses, maintaining the liquidity of the banking system and ensuring the stability of the payment system.
"Given the impact of the pandemic on the macroeconomic situation and the dynamic of the inflation the CBU reduced the key rate to 15 percent in April 2020, and further to 14 percent in September 2020.
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