Can Uzbekistan Economy Retain Its High Growth Rate? Scenarios of Economic Development in 2015-30

27 Pages Posted: 8 Nov 2014

See all articles by Vladimir Popov

Vladimir Popov

Central Economics and Mathematics Institute (CEMI); New Economic School (NES)

Date Written: November 6, 2014

Abstract

Uzbekistan in recent 10 years is an extremely successful economy – high growth (8%), low domestic and international debt, undervalued exchange rate, relatively even distribution of income, creation from scratch competitive export oriented auto industry. It is important though to avoid “dizziness from success” and to envisage possible growth traps in the future. This paper discusses two unfavourable scenarios – negative terms of trade shock due to the decline in cotton, gas and gold prices (a deterioration of the current account balance by 10 p.p. of GDP) and a decline in growth rates of total factor productivity (TFP), as well as possible government responses to these shocks, in particular, changes in industrial policy.

In recent years Uzbekistan promotes heavy chemistry industries (production of synthetic fuel and polypropylene goods from natural gas). This is the next stage of industrial policy after reaching food and energy self-sufficiency and successful auto industry development. There are reservations, however, against this strategy. First, gas production is about to decline due to depletion of reserves. Second, the level and growth rates of TFP in heavy chemistry are by far not the highest (they are the highest in light and food industry and in machine building). The increased share of heavy chemistry in total industrial output will cause the decline in the level and the growth rates of TFP. Third, auto industry is already a success, it may be reasonable to continue to support machine building industries of medium level of technology sophistication, like auto industry. For the country of the average size, export specialization in two major areas (autos and heavy chemistry) may be excessive.

Keywords: Uzbekistan, scenarios of economic development in 2015-30, industrial policy, reaction to shocks, terms of trade, total factor productivity

JEL Classification: E60, F43, O40, O47, O53

Suggested Citation

Popov, Vladimir, Can Uzbekistan Economy Retain Its High Growth Rate? Scenarios of Economic Development in 2015-30 (November 6, 2014). Available at SSRN: https://ssrn.com/abstract=2520224 or http://dx.doi.org/10.2139/ssrn.2520224

Vladimir Popov (Contact Author)

Central Economics and Mathematics Institute (CEMI) ( email )

Nakhimovsky Prospect 47
Moscow, 117418
Russia

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

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