The review of the Central Bank of Uzbekistan on monetary policy for the 1st quarter of 2022 notes that today, despite the fact that the economic situation in the countries – the main trading partners of Uzbekistan, including exchange rates, has stabilized to some extent, the level of uncertainty and risks in the medium term, for all macroeconomic indicators remains high.

Rising prices on the world market for raw materials and energy resources, problems with international logistics lead to an acceleration of inflationary processes in all countries of the world and an increase in basic (accounting) interest rates by almost all major central banks.

These factors, in turn, have a primary and secondary impact on our country through the tightening of financial conditions on international financial markets, imported inflation and changes in foreign trade flows.

In response to changes in external conditions, the exchange rate of the national currency began to stabilize after the March fluctuations (it depreciated by 5% in March), and the rate of devaluation since the beginning of the year was 4.1%. According to preliminary estimates, these rates of devaluation are assumed to cover almost all short-term changes (shocks).

According to the State Statistics Committee, real GDP growth in the first quarter of 2022 was 5.8%.

In March, the inflation rate was 1.5%, rising to 10.5% year on year. The core inflation indicator formed at the level of 9.1% per annum, and its contribution to the overall inflation increased to 6.9 percentage points.

The growing dynamics of prices is mainly due to imported inflation, expectations of rising prices for food products in foreign markets and traditional seasonal factors.

In April, there was a certain stabilization of prices, according to weekly observations of the Central Bank, in the first 20 days of April, a decrease and balancing of prices for some basic consumer goods was recorded.

In the second quarter, the downward contribution of the group of fruits and vegetables to price dynamics is expected due to seasonal factors and an increase in the upward contribution of the group of non-food products due to the influence of external factors and structural changes.

According to a survey in March 2022, inflation expectations of the population amounted to 15%, and entrepreneurs – 15.4%. Expectations are expected to ease in the future due to the relative rebalancing of the exchange rate and structural reforms.

By the end of the year, the impact of supply factors (production, transport and logistics, imports, rising fuel and energy prices) on inflation is expected to be higher than demand factors.

According to the baseline scenario of the Central Bank of Uzbekistan, the inflation rate is expected at the level of 12-14% at the end of the year, influenced by supply-side factors related to imported inflation, production, logistics and supplies (forecast at the beginning of the year is 8-9%).

The decline in economic activity among major trading partners, changes in the exchange rate of the national currency and migration flows suggest that under the baseline scenario, the volume of cross-border remittances will decrease by 18-25% this year compared to last year.

Due to the change in the dynamics of gross external and domestic demand, a relatively high deflator, and the impact of fiscal conditions, the country’s GDP growth in 2022 is expected to be in the range of 3.5-4.5% (forecast at the beginning of the year is 5.5-6.5% ).