TASHKENT, Uzbekistan, December 9. Standard & Poor's (S&P Global Ratings) forecasts Uzbekistan's current account deficits to average nearly 5.3 percent of GDP from 2023 through 2026, Trend reports.
As per latest report by S&P Global Ratings, following a temporary decline in 2022, the agency predicts that Uzbekistan will cover its current account deficits through a mix of net Foreign Direct Investment (FDI) and debt.
Moreover, despite improvements in monetary policy in recent years, S&P still views the Uzbek Central Bank’s operational independence as constrained, while loan dollarization remains elevated at about 43 percent.
“The current account deficit surged during first-half 2023 to 7.7 percent of GDP, largely due to a drop in remittances and strong import growth. Higher global commodity prices and gold sales helped exports increase significantly in 2022. However, we expect gold prices to decline gradually over our forecast period from $1,850 per ounce in 2023, to $1,500 per ounce in 2024 and $1,400 in 2025. Conversely, increasing copper prices could offset part of the decline,” the rating agency noted.
S&P projects that Uzbekistan’s current account deficits will average 5.3 percent from 2023 through 2026, fueled by imports of capital and high-tech goods.
“Uzbekistan became a net importer of gas in October 2023 after it started importing Russian gas via a pipeline through Kazakhstan. Along with increasing household consumption, large projects like the Gas to Liquids Plant, Shurtan Gas Chemical Complex, and Gas Chemical Complex MTO (methanol to olefin) will add to gas consumption and imports over our forecast period,” the report says.
Standard & Poor's notes that Uzbekistan’s gross external debt has been rising in recent years, particularly within the public and financial sectors, which primarily reflects the opening of the economy and its sizable investment and development needs.
Meanwhile, Uzbekistan’s current account displayed a deficit of $4.4 billion during the first 9 months of 2023, which comprises 6.7 percent of the country’s GDP rate.
Uzbekistan boosted gas imports seven times earlier this year, bringing the budget deficit rate to 5.7 percent, despite budget law requiring it not to exceed 3 percent.
Following an increase in natural gas imports, consolidated budget expenditures surpassed receipts by 27 trillion Uzbek soums ($2.3 billion) in the first half of 2023, resulting in a budget deficit that was mostly covered by funds and borrowings from the previous year.
