Uzbekistan Economy - overview

Economy - overview: Uzbekistan is a dry, landlocked country; 11% of the land is intensely cultivated, in irrigated river valleys. More than 60% of the population lives in densely populated rural communities. Export of hydrocarbons, primarily natural gas, provided about 40% of foreign exchange earnings in 2009. Other major export earners include gold and cotton. Uzbekistan is now the world's second-largest cotton exporter and fifth largest producer; Uzbekistan is aggressively addressing international criticism for the use of child labor in its cotton harvest. Desspite ongong efforts to diversify crops, Uzbekistani agriculture remains largely centered around cotton production. Following independence in September 1991, the government sought to prop up its Soviet-style command economy with subsidies and tight controls on production and prices. While aware of the need to improve the investment climate, the government still sponsors measures that often increase, not decrease, its control over business decisions. A sharp increase in the inequality of income distribution has hurt the lower ranks of society since independence. In 2003, the government accepted Article VIII obligations under the IMF, providing for full currency convertibility. However, strict currency controls and tightening of borders have lessened the effects of convertibility and have also led to some shortages that have further stifled economic activity. The Central Bank often delays or restricts convertibility, especially for consumer goods. Until 2012, Uzbekistan had posted GDP growth of over 8% per year for several years, driven primarily by rising world prices for its main export commodities - natural gas, cotton and gold - and some industrial growth. Growth slipped in 2012 as a result of lower export prices due to the continuing European recesssion. In the past Uzbekistani authorities have accused US and other foreign companies operating in Uzbekistan of violating Uzbekistani tax laws and have frozen their assets, with several new expropriations in 2010-11. At the same time, the Uzbekistani Government has actively courted several major US and international corporations, offering attractive financing and tax advantages, and has landed a significant US investment in the automotive industry, including the opening of a powertrain manufacturing facility in Tashkent in November, 2011. Uzbekistan has seen few effects from the global economic downturn, primarily due to its relative isolation from the global financial markets.

Definition: This entry briefly describes the type of economy, including the degree of market orientation, the level of economic development, the most important natural resources, and the unique areas of specialization. It also characterizes major economic events and policy changes in the most recent 12 months and may include a statement about one or two key future macroeconomic trends.

Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of February 21, 2013