Central Bank Predicts Decrease in Inflation for 2025.
Despite a slowdown in overall price growth in December, the Central Bank of Uzbekistan observed an acceleration in core inflation, leading to a decision to keep the key interest rate at 13.5% during its meeting on January 23. The board cited persistent high inflation expectations among the Uzbek population as a key factor in this decision.
Economists have noted the mixed nature of inflationary factors in the country. While overall inflation for 2024 stood at 9.8%, slightly lower than in previous months, the price growth for three-quarters of goods and services in the consumer basket slowed in 2023, indicating ongoing price stabilization.
Core inflation, on the other hand, rose to 7.2% in December, driven by higher prices for industrial goods and services. This points to the presence of inflationary pressures both from the supply side and aggregate demand.
Inflation expectations have increased among the population and businesses, partly due to seasonal supply factors. The Central Bank expects these pressures to ease over time, with its “relatively tight” monetary policy playing a role in reducing inflation expectations.
The primary effects of energy tariff hikes in May 2024 are expected to subside by the end of the second quarter. However, a temporary increase in overall inflation rate is anticipated in April due to a one-month delay in the second stage of the reform.
The secondary impact of energy tariff hikes on core inflation will be a key factor in determining future monetary policy direction. The Central Bank projects an overall inflation rate of 7-8% by year-end.
GDP growth in Uzbekistan, driven by an increase in private investment, is projected to be around 6%. High consumer activity, supported by rising household incomes, is expected to sustain aggregate demand and economic growth, potentially accelerating the growth of core inflation in the coming months.
Rising global prices for certain food products imported by Uzbekistan pose a risk as an inflationary factor, according to experts. The Central Bank also anticipates improvements in the current account balance and macroeconomic stability in Uzbekistan’s main trading partner countries, suggesting balanced trends in the currency market.
While the Central Bank has maintained its medium-term inflation target at 5%, it remains open to adjusting monetary policy if inflationary pressures and demand-driven factors intensify in the future.
