Uzbekistan: A Stable Economy in an Unstable World

Amid global instability driven by economic, political, and environmental changes, Uzbekistan is actively developing domestic markets, diversifying its economy and external economic ties. These efforts aim to reduce dependency on specific sectors, markets, and countries while enhancing resilience to external shocks.

Key Reform Highlights

Since embarking on reforms in 2017, Uzbekistan has implemented its Strategic Action Plan for 2017–2021. The reforms included reducing tax burdens, unifying exchange rates, liberalizing the currency market (2017), introducing currency convertibility for current operations, reducing customs duties, adopting a new Tax Code (2020), reforming the banking sector and cash circulation, and lowering administrative barriers to doing business. Significant achievements have also been made in strengthening the rule of law, combating corruption, creating favorable conditions for entrepreneurs, and fostering competition and innovation-friendly business environments – recognitions highlighted by various international organizations in their rankings.

Key outcomes of Uzbekistan's reforms include reducing state participation in the economy, strengthening legal guarantees for private property rights, and supporting entrepreneurship development. An effective competitive environment has been created across economic sectors, monopolies in goods and services markets are being phased out, and measures are being implemented to accelerate regional development.

As a result, foreign direct investment inflows have tripled – from $4.4 billion in 2017 to $22.4 billion in 2023.

A Vision for the Future

In 2022, Uzbekistan began implementing the Development Strategy for the New Uzbekistan (2022–2026), and in 2023, adopted the National Development Strategy until 2030 ("Uzbekistan-2030"). The country aims to maintain GDP growth rates at 6-7%. Key goals include increasing industrial production by 40%, attracting over $120 billion in additional investments, and raising the share of private banks to 60% of total banking assets by 2026.

Diversification of Economic Ties

Diversification reduces a country's dependency on specific markets and resource sources, which is critically important during economic crises and shifts on the international stage. For Uzbekistan, diversifying its economic ties and relationships is a strategically significant task, enabling the country to adapt to the challenges of an unstable world.

In the early 1990s, Uzbekistan's export markets were limited, with significant dependence on traditional partners such as Russia and other CIS countries. However, recent measures have significantly broadened the scope of export destinations. Between 2000 and 2015, the number of export destinations increased from 137 to 170 countries, reaching over 200 by 2023. Between 2017 and 2023, exports nearly doubled, imports tripled, and total foreign trade volume grew by 2.4 times.

In 2017, Uzbekistan’s foreign trade turnover stood at $26.9 billion, with CIS countries accounting for 32.9% of the total. Other major trade partners included China, Turkey, South Korea, Germany, France, Afghanistan, the US, Lithuania, Brazil, Iran, and Italy, which collectively accounted for 40% of the total trade volume. By 2023, the largest shares in Uzbekistan’s trade turnover were held by China (21.9%), Russia (15.8%), Kazakhstan (7%), Turkey (5%), South Korea (3.7%), Germany (1.7%), Turkmenistan (1.7%), France (1.6%), Kyrgyzstan (1.5%), Afghanistan (1.4%), Tajikistan (1.2%), and the US (1.1%).

Since 2017, significant changes have been observed in trade with neighboring countries – Tajikistan, Turkmenistan, Kyrgyzstan, and Kazakhstan. Trade turnover with Kyrgyzstan and Turkmenistan increased fivefold, with Tajikistan tripled, and with Kazakhstan doubled.

Diversification of Export Potential

Over the past six years, Uzbekistan has significantly expanded its export capabilities by increasing the share of finished and higher-tech products. From 2017 to 2023, the country began producing and exporting new goods that were not previously traded internationally. These include internal combustion engines (1.3%), auto parts (1.2%), car bodies (0.74%), refrigeration equipment (0.68%), and others.

Thanks to industrial and agricultural reforms, the share of cotton fiber in exports has sharply declined. While in 2010 it accounted for 12.1%, by the end of 2023 it had fallen to just 0.03%. In contrast, textile exports reached $3.05 billion, constituting 12.5% of total exports. Over 550 types of textile products were exported to more than 70 countries, with the largest markets being Russia, Turkey, Kyrgyzstan, and China.

Additionally, the quality and volume of exported fruit and vegetable products have grown steadily. In 2023, Uzbekistan exported 1.7 million tons of fruits and vegetables, double the amount in 2017, with a total value of $1.2 billion (a 3.3% increase compared to 2022). This segment accounted for 4.8% of total exports. By the end of 2023, Uzbekistan ranked among the world’s top three exporters of prunes, alongside Chile and the United States.

WTO Membership

A key goal of Uzbekistan’s foreign economic policy is joining the World Trade Organization (WTO). Membership is expected to unlock new economic opportunities, including increased exports, foreign investment inflows, GDP growth, and improved living standards.

According to the Center for Economic Research and Reforms, trade liberalization associated with WTO membership could boost economic growth rates by 0.4-0.5% and improve public welfare by 0.9-1.0%.

Membership is also anticipated to strengthen multilateral trade relations in Central Asia, enhancing predictability and stability in the region. Uzbekistan will gain the ability to participate in shaping international trade norms and standards, further integrating into the global economy.

Conclusion

Economic resilience and security in today’s interconnected world are achieved not through isolation but by opening up the economy, diversifying economic partnerships, production, and external markets. In recent years, Uzbekistan has made significant progress in these areas.

A measure of the country’s trade openness is the Trade Openness Index, which reflects the ratio of foreign trade indicators to GDP. For Uzbekistan, this index stood at 43% in 2017 and reached nearly 70% by 2023. The ratio of foreign trade turnover to GDP has also shown substantial growth, reflecting an expanding economy through increased trade. In 2022, this figure was 62.2%, 19.5% higher than in 2017.

Uzbekistan’s economic ties and trade relations with various regions across Eurasia are developing dynamically due to several key factors.

Firstly, strengthening its position as a transport hub. Uzbekistan aims to solidify its role as a pivotal transport link between Central and South Asia. Initiatives such as the "Central Asia – South Asia" corridor focus on improving logistics and reducing transportation costs. This opens up new trade opportunities with neighboring countries and regions, including Russia, China, and South Asia.

Secondly, participation in multilateral economic initiatives. Active involvement in organizations like the Shanghai Cooperation Organization (SCO) and the Eurasian Economic Union (EAEU) enables Uzbekistan to expand its export capabilities and attract foreign investments in critical sectors like energy and agriculture.

Thirdly, improving the business climate. Ongoing reforms aim to simplify business procedures, making Uzbekistan an increasingly attractive destination for foreign investors. Measures to enhance the investment environment and foster innovation are central to the government’s strategy.

With its ongoing reforms, active participation in international organizations, and strategic geographic location, Uzbekistan is well-positioned to become a key player in Eurasian economic integration.

Afzal Artikov,

Center for Economic Research and Reforms