The government reported growth rising from 6.2% in the first half of 2023 to 6.4% this year, with gains in industry and construction. Growth in industry accelerated from 5.6% to 7.8%, driven by strong gains in manufacturing. Expansion in construction doubled from 5.2% to 10.1% with rapid growth in housing and infrastructure. Expansion in agriculture rose marginally, from 3.7% to 3.8%, with modest increases in crop and livestock production. Growth in services decreased from 7.9% to 6.4% as gains in trade were exceeded by slowdowns in transportation, storage, information and communication, and accommodation and food services.

A sharp rise in investment and steady growth in consumption boosted growth on the demand side. Expansion in gross capital formation soared from 19.7% in the first half of 2023 to 36.6% this year on robust infrastructure spending and the modernization of machinery and equipment. Growth in consumption increased from 4.3% to an estimated 5.5% as household expenditures rose due to higher wages and pensions and a 25% rise in remittance inflows, mainly from Germany, Poland, the Republic of Korea, and the United States. The government’s programs to diversify the destinations of migrant workers from Uzbekistan helped reduce the share of remittances from the Russian Federation from about 87% in 2022 to 78% in 2023 and 77% in the first half of 2024. The deficit in net exports of goods and services widened by 8.0%, with the trade deficit expanding by 19.4% for goods, reflecting higher imports of petrochemicals, machinery, and transport equipment. In the second half of 2024, rising remittances, wages, and pensions should maintain growth in consumption. Continued growth is also anticipated for investment, on the expectation of high global prices for gold and copper, high domestic needs for industrial goods and housing, strong foreign direct investment, and structural reform to liberalize markets and regulated prices. With these projections, this report raises growth forecasts for 2024 and 2025.

Inflation decelerated in the first 7 months of 2024 despite higher domestic prices for energy. Inflation slowed from 10.7% in the 7 months of 2023 to 9.5% this year because of smaller price increases for food and imported goods. Food price inflation fell from 13.4% to 8.4% with higher domestic supplies of fruit and vegetables and lower costs for imported food. Inflation for other goods declined from 9.2% to 7.0% with smaller price increases for apparel, shoes, and household items. Higher administered prices for energy doubled inflation for services from 8.3% to 17.3%. Even though the inflation rate is still above the target since inflation has been slowing, the monetary authorities cut the policy interest rate from 14.0% to 13.5% in July 2024, the first reduction since March 2023. In view of price development thus far, inflation projections for 2024 and 2025 are revised down despite government plans for further energy price increases in April 2025.

The current account deficit expanded from the equivalent of 6.6% of GDP in the first quarter of 2023 to 7.1% a year later. The trade deficit widened by 3.1% as imports of goods rose by 3.4% on higher imports of machinery and equipment, ferrous metals, and petrochemicals. Exports of goods, which are smaller than imports, rose by 6.3%, with growth in gold, textiles, foodstuffs, copper, and petrochemicals. Service exports soared by 22.9% as demand for transport and tourism services surged, while service imports rose by 8.9% on higher demand for shipping, business services, and support for foreign tourism. Inward money transfers rose by 6.0%, and interest on external debt increased, cutting the income surplus by 13.3%. International reserves provided cover for 10.5 months of imports at the end of March 2024.

Source: The Asian Development Bank