In-depth Analysis of Money-Credit Policy of Uzbekistan in 2017

Foreign Economic Conditions and Activities
With the revival of economic growth rates in the world, including major trading partners of Uzbekistan in 2017, the development of economic ties with the neighboring countries and expansion of domestic foreign trade turnover were achieved through favorable market conditions in international markets and the liberalization of the foreign exchange market and foreign economic activity.
The Economic States of Uzbekistan and Its Major Trading Partners in the World
According to the International Monetary Fund (2017), the growth rate of the world economy in 2017 is expected to be 3.6 % in 2017, which is 0.4 percentage points higher than in 2016 (3.2 %).
(The numbers for 2017 and 2018 are expected and forecasted, respectively)
Source: Outlook for the Development of the World Economy, October 2017 [ CITATION IMF17 \l 1033 ]

It is also expected that the growth rate of the developing countries will increase from 4.3% in 2016 to 4.6% by the end of 2017, and the general growth rate of developed countries will rise from 1.7% to 2.2%[ CITATION IMF17 \l 1033 ].

According to the IMF, the current and projected growth rates of the world economy are as follows:

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  In 2017, there will be a higher economic development compared to 2016 in developing countries like China, Brazil and Russia, and developed countries, such as USA, Japan, Germany, Italy, Canada and France;
  
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  Investment in the development of science, technology and technology in the world economy to give positive results and to improve labor productivity in the economy in order to overcome the negative consequences of the global financial crisis and the decline in prices for raw materials;
  
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  Continuous growth of global demand in advanced and emerging markets, continued growth of global trade, as well as continued growth of global investment activity;
  
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  The development of economic relations within the framework of the project "One Belt – One Road" that connects Asian and European regions.
  

Additionally, positive changes are expected in the economy of the countries, which are the main trading partners of Uzbekistan. In particular, according to the results of 2017, it is forecasted that the rate of economic growth in Russia will be 1.8 % after the fall of 0.2 percent in 2016, while Kazakhstan has seen a significant improvement over the previous year (1.1 % increase). It is estimated that the economic growth rates in China and Turkey will also rise and reach 6.8 and 5.1 % respectively in 2017.
(The numbers for 2017 and 2018 are expected and forecasted, respectively)
Source: Outlook for the Development of the World Economy, October 2017 [ CITATION IMF17 \l 1033 ]
Dynamics of World Prices for Basic Export and Import Goods
Sustainable growth rates in the world economy and growing foreign demand in major trading partners have contributed to the positive growth of prices for Uzbekistan in the world markets this year. The trend of a sharp decline in the world commodity prices for raw materials, which began in 2014, has slowed down in 2017 and prices have started to recover. This year, the world commodity exchange exchanges have not changed in price, and prices for precious and nonferrous metals have increased. In particular, the copper and gold price, which are the leading export items of Uzbekistan in this period, increased by 16% and 11%, respectively, compared to the beginning of the year[ CITATION Inv17 \l 1033 ]. Cotton prices rose in January-May and declined in the second half of the year and remained almost unchanged compared to the beginning of the year[ CITATION Ind17 \l 1033 ]. Also, food, metal and natural gas prices remained the same.

Source: World Bank data (2017)

On the other hand, the increase in operations in the global financial markets, the depreciation of the US dollar rate, and the geopolitical risks and the rise in demand for jewelry in India and China in the first half of the year have increased the demand for gold in the world market and at the beginning of September this year, to $1 billion[ CITATION DeM17 \l 1033 ]. However, in October, under the influence of interest rates on the US Federal Reserve, the dollar began to recover, and the gold price fell to $ 1,880, with strong variations.
During this period, the dynamics of oil prices have led to two trends in the opposite direction. In particular, in the first half of 2017, the Brent oil price fell by 15.7%[ CITATION Kra17 \l 1033 ]. Such a downturn has led to factors such as increasing oil production in non-OPEC member states, particularly in Canada, the United States, Europe, and Latin America, and as a consequence, the increase in the supply of fuel in the fuel market. The adoption of the decision to extend the “OPEC +” agreement by March 2018 and the decline in oil production in Venezuela and Russia resulted in a 20.1% increase in its production, resulting in an average of 1.3 percent increase compared to the beginning of the year[ CITATION Dav17 \l 1033 ].

Source: World Bank data
Also, in January-September this year there was a considerable decline in the prices of some basic products imported to Uzbekistan. In particular, world prices for sugar decreased by 22.2 percent compared to the beginning of the year and sunflower oil prices plunged by 2.1 percent[ CITATION Ind171 \l 1033 ].
Source: Based on the data provided by the World Food and Agricultural Organization under the United Nations (UN)


Main Indicators of Foreign Trade Activity
In the first 9 months of 2017, Uzbekistan's foreign trade turnover increased by 16.7% compared to the same period of last year and amounted to about $ 20 billion USD. At the same time, the volume of exports of goods and services increased by 25.6% and amounted to UZS 10.4 bln. The volume of imports increased by 8.4% and amounted to US $ 9.6 billion USD[ CITATION UzR17 \l 1033 ].
According to the data given by the State Committee of the Republic of Uzbekistan on Statistics (2017), the main growth rates in the structure of exports were consumer goods (23.5 percent growth and 5.7 percent in total exports), energy and oil products (11.3 and 13.4 percent), ferrous and non-ferrous metals (24.8 percent and 6.2 percent), machinery and equipment (60.5 and 2.4 percent), services (10.8 and 24.9 percent). At the same time, exports of cotton fiber decreased by 18.6% (2.7%) and exports of chemical products decreased by 2.2% (6.3%).

Source: Based on the data from the State Statistics Committee of the Republic of Uzbekistan (2017)

Source: Based on the data from the State Statistics Committee of the Republic of Uzbekistan (2017)
The increase in imports was due to the increase in chemical products (5.6 percent growth rate and 17.1 percent in total imports), energy and oil products (13.5 and 5.2 percent), machinery and equipment (1.8 and 38.7 percent), services import (22.5 and 7.3 percent). At the same time, imports of consumer goods decreased by 8.2% (share of imports - 10.2%). In the same period, 15.7% of total exports were to the Russian Federation, 14.3% to China, 8% to Kazakhstan, 6% to Turkey and 4.1% to Afghanistan. In the structure of import, the share of the Russian Federation accounted for 20.3 percent, China - 20.9 percent, South Korea - 9.2 percent, Kazakhstan - 7.5 percent, Turkey - 4.8 percent, Germany - 4.7 percent and Ukraine's share, 3 percent[ CITATION The172 \l 1033 ].
According to CBU, it is expected that by the end of 2017 the export volumes will grow and the positive balance of foreign trade turnover will be maintained.