According to the official report of the Central Bank of the Republic of Uzbekistan, “Monetary Policy Review for Q1 2025,” Uzbekistan’s economy in Q1 2025 continued robust growth amidst global and domestic challenges. The Central Bank maintained a commitment to price stability, targeting 5% inflation medium-term. This review covers the macroeconomic environment, monetary conditions, lending’s economic impact, automotive market trends, real effective exchange rate, and regional inflation dynamics, with projections.
Macroeconomic Environment and Projections
Inflation and Price Dynamics
Inflation reached 10.3% year-on-year by March 2025, driven by demand (rising incomes, remittances +18.2%) and supply factors (imported goods costs). Core inflation rose to 8.1%. Energy price liberalization increased utility and transport costs. Inflation expectations (households: 11–12%, businesses: 10–11%) eased but remain high, risking secondary effects.
Decision on the Main Policy Rate
The policy rate was held at 14% (April 24, 2025) to curb inflation and manage demand-supply risks. Inflation is projected at 8% by year-end, with Q2 energy price effects fading. A June 2025 review will assess secondary liberalization impacts on logistics and manufacturing.
Economic Growth and Domestic Conditions
GDP grew 6.8%, surpassing 2024’s 6.2%, driven by consumer activity (remittances +18.2%) and private investment. Retail trade (+7.4%) and industry (+6.1%) expanded. Forecast: 6–6.5% growth in 2025, requiring monitoring to prevent overheating.
External Economic Conditions
U.S. tariffs heightened uncertainty. Global growth: 2.8%, trade: 1.7% (IMF). Gold prices (>3000 USD/ounce) rose, copper ($4.5/pound) and oil ($74/barrel) stabilized, cotton fell 15%. Partner growth slows: China (4%), Russia (4%), Kazakhstan (4.9%), limiting exports.
Real Effective Exchange Rate
REER remains balanced, with sum volatility <1%. Factors: productivity (+0.8–1.2%), PPP (GDP per capita +5.4%), government spending (28% GDP), debt (38% GDP), rates (3.5–3.8%), trade terms. REER appreciation: 2.2%/year, 2025 forecast: 1.5–2%.
Monetary Policy Conditions
Real rate: 3.5–3.8%. UZONIA (12.7%), REPO (12.9%). GTS yields: 15.4%. Loans (+16.8%, 540T sums), deposits (+34.5%, 210T sums). Dollarization: loans 40.2%, deposits 24.5%.
Lending to the Economy
Loans in sums +22%, foreign currency +7.2%. Rates: 23.1% (sums), 23.6% (retail), 22.7% (corporate). Long-term loans (79%): 30.9T sums to households (+74%), 12T sums to firms (+22%). Microloans (53.6%), mortgages (12.8%) grew, auto loans fell 17.6% (4.2T sums).
Deposit Base
Sum deposits +44.7%, fixed-term deposits +62.3% (60T sums). Rates: 22.1% (nominal), 6.9% (real).
Automotive Market Trends
New vehicle prices +4.7% (sums) due to demand, import cuts (–12%), and costs. Hybrid/electric demand +25%. Used vehicles –3.2%. Auto loans –17.6%, microloans/mortgages +2.3–1.9x.
Inflation in Central Asia and the Caucasus
Inertia: +1pp = +0.7–0.8pp. Expectations correlation: 0.15. Global food prices (+1pp) = +0.1pp. External inflation: +1.7% over two quarters. Devaluation (+1pp) = +0.2pp. Tight policy reduces external impact to 0.02pp.
Impact of Lending on Economic Growth
VAR: loans +1pp = GDP +0.05pp (3–7 months), +0.39pp (8–20 months). Household loans (0.06pp) outperform corporate (0.03pp). Long-term impact negligible.
Conclusion
The Central Bank’s 14% rate policy managed inflation and growth risks. Inflation (10.3%) is expected to fall to 8%, with GDP growth at 6–6.5%. Lending, deposits, and lower dollarization strengthen the economy. External risks persist, but stable REER and gold exports mitigate them. Automotive and lending trends reflect shifting priorities. Uzbekistan is poised for progress with adaptive policies.
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