Uzbekistan Cuts Growth Forecast
Uzbekistan Cuts Growth Forecast
Uzbekistan’s president Islam Karimov has announced a reduction in the country’s economic growth forecast for 2012, saying the global economic crisis will cut demand for exports and reduce foreign currency earnings.
Karimov did not put a figure to the anticipated slowdown, but the European Bank for Reconstruction and Development has cut its growth predictions for Uzbekistan from 7.5 to seven per cent for 2012.
Speaking to the cabinet in the capital Tashkent on January 19, Karimov accused cotton farmers of losing the country earnings of 100 million US dollars last year by failing to hit government-imposed targets.
“In 2011, more than 3,800 farms failed to fulfil targets they had accepted for production of raw cotton, as a result of which the shortfall was more than 160,000 tons,” Karimov said, according to the Uznews.net website.
“The speech was a kind of confession from Karimov that the country had reached an impasse,” Saparbay Jubbaev, an independent economist in Tashkent, said.
Yuly Yusupov, director of the Centre for Economic Research in Tashkent, agrees that Uzbekistan needs to industrialise further, as its dependency on raw materials and agriculture leaves it exposed to external shocks.
Uzbekistan is one of the world’s biggest cotton producers, and is heavily reliant on export revenues from the commodity as well as from natural gas and gold. Like many raw materials exporters, it has suffered from falling demand and prices with the slowing of the global economy in recent years. An additional factor affecting cotton production may stem from the international pressure over its continuing use of child labour.
The government dubbed 2011 the “Year of Small Businesses and Private Enterprise”, in a bid to reduce the country’s dependency on raw commodities by boosting manufacturing. But achieving this kind of change is difficult, given restrictive trade rules, and the highly interventionist policies pursued by the state, both of which make investors reluctant to risk their money in Uzbekistan.
The Heritage Foundation, a Washington-based think tank, placed Uzbekistan in 164th place out of 179 countries in its 2012 Index of Economic Freedom, citing widespread corruption, weak protection of property rights, and the lack of an independent judiciary.
One local economist told IWPR on condition of anonymity that the government should minimise its interference in the economy, crack down on the black market, and prevent public officials from owning large-scale businesses. He also said laws needed to be passed protecting investors’ rights.
“Karimov talks about falling foreign-currency receipts, but this is largely due to the reluctance to invest in the Uzbek economy,” he said. “There are so many stories about foreign [investors] being screwed over that it’s quite obvious why European investors are giving Uzbekistan a wide berth.”
As well as the lack of legal protections, businesses are also put off by the difficulties they face converting the local currency, the som, economists say.
“Some companies refuse to operate in Uzbekistan until this problem is solved,” Jubbaev said, adding that lifting restrictions on convertibility would take considerable political will, since it would mean “touching on the vital interests of the individuals who make massive amounts of money out of currency trading”.
This article was produced as part of IWPR’s News Briefing Central Asia output, funded by the National Endowment for Democracy.
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