FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT APRIL 2009
“TOSHKENT” REPUBLICAN STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Economic and Political Environment
Given the dominance of the political scene
by Mr Karimov, there is little prospect of
greater democratization or transparency
over the forecast period. Mr Karimov, who
was last elected for a seven-year term in
December 2007, is expected to maintain a
firm grip on power, as there seems to be no
coordinated opposition to his rule from
within the political hierarchy. Furthermore,
years of repression have prevented the
emergence of an opposition figure capable
of challenging him successfully. Most of his
genuine opponents are living in exile.
However, the centralization of power in Mr
Karimov makes for a highly uncertain
outlook once he eventually departs the
political scene. Doubts over the 70-year-old
leader’s health add to this uncertainty.
Relations with the US and the EU have
improved from a low in 2005, driven by the
US’s regional security agenda, the desire of
some EU states to look for alternative
energy sources in Central Asia in order to
reduce reliance on Russia, and the small
steps taken by the Uzbek authorities
towards tackling human rights concerns.
Nevertheless, ties with the West will remain
constrained by human rights issues. The EU
has announced plans to weaken its
sanctions against Uzbekistan, but human
rights organizations will continue to press
for a harsher stance. The West will continue
to have little leverage over Uzbekistan in this
area, in part because the country does not
rely on substantial support from Western
multilateral financial institutions. Over the
forecast period Uzbekistan will strengthen
its relations with Russia and China, neither
of which shares the West’s concerns over
the lack of democracy in Uzbekistan.
Expanding economic links will give Russia
and China an interest in maintaining stability
in Uzbekistan, and security ties with Russia
will deepen. Nevertheless, relations with
Uzbekistan’s immediate neighbors will
occasionally be tense, particularly in view of
ongoing disputes over water supplies.
Uzbekistan’s relative isolation from global
financial markets means that it should
remain shielded from the worst
consequences of the turmoil in world
markets. The IMF has repeatedly called for
greater progress in developing the banking
system, liberalizing the trade and payments
systems, and adopting a more flexible
exchange-rate policy.
Economic Performance
Uzbekistan is relatively immune from turmoil
in global financial markets; the chief external
factors affecting economic performance are
trends in commodity prices. Despite the
prospects for lower global demand, price
trends for Uzbekistan’s main export goods
still look favorable over the forecast period.
Following a rise of almost 30% on average
in 2008, gold prices are set to decline by
around 5% annually in 2009-10, but they will
remain high by historical norms. In 2009 a
marked slowdown in global economic
growth will result in lower demand for
cotton, the country’s second most important
commodity in terms of export earnings.
Despite a reduction in gas prices globally,
Uzbekistan will benefit from further
significant increases in its gas export price
over the medium term.
Real GDP growth in 2009-10 is likely to
moderate from an officially reported 9.5% in
2007 and an estimated 8.6% in 2008,
because of base-period effects and a
continuing slight slowdown in industrial
output growth. However, growth will remain
strong, at an annual average of around 6.5-
7%, because of still-solid exports and rising
investment. The performance of
Uzbekistan’s cotton exports in 2009 is also
under threat from a Western boycott. The
Key Information Contacts
State Property Committee www.spc.gov.uz
Ministry of Finance www.mf.uz/eng
National Bank of Uzbekistan http://eng.nbu.com/about/history/index.php
State Central Securities Depository www.deponet.uz/english.shtml
Portal of the State Authority www.gov.uz/en
PAGE 134
Uzbek economy is relatively insulated from
developments on global financial markets,
because of its limited integration with them
and because of its underdeveloped
domestic financial sector.
Inflation is forecast to slow to 10% in 2009
and 8% in 2010. Imported inflation will
decline owing to lower food and oil prices in
2009, but robust money supply growth, as
the government increases wages and
benefits further, will limit the extent of
disinflation. Robust inflows of export
revenue will continue to underpin the
currency throughout the forecast period,
although the authorities will continue to
target a slow pace of nominal depreciation
in order to support export competitiveness.
The som has depreciated in real effective
terms in recent years and the IMF considers
that the currency is probably undervalued.
Uzbek exports of automotives will suffer
from a decline in demand in Russia, and
uncertainty surrounds the prospects for
cotton exports in the face of a boycott from
Western retailers. The annual trade in goods
surplus will therefore fall to below 15% of
GDP. An increase in import costs in 2010,
owing to a rebound in global prices for food
and fuel, will result in a further decline in the
current-account surplus, to 19% of GDP.
Investment interest from the FRD, which
was instituted in 2006, is likely to maintain
the income surplus at around 0.5% of GDP
in 2009-10.*
* The Economic Intelligence Unit Ltd., November 2008