Uzbekistan has a fast-growing developing economy that is moving away from an old Soviet-style command system towards a modern market economy. It is the second largest economy in Central Asia, after Kazakhstan. Following deep economic reforms that made the local currency fully exchangeable, the country has experienced a significant surge in foreign investment. This shift brought in a record volume of foreign direct investment, heavily backed by international partners such as China, Russia, Turkey, Saudi Arabia, and the UAE.
Under the administration of Islam Karimov, currency conversion capacity was restricted, imports were controlled, and Uzbekistan's borders with neighbouring Kazakhstan, Kyrgyzstan, and Tajikistan were sporadically closed. Since the election of President Shavkat Mirziyoyev, economic and social reforms have been implemented to boost growth and modernise the country. International financial institutions, including the EBRD, the Asian Development Bank, and the World Bank, are supportive of the reform process and have increased their presence in the country. Uzbekistan is a major producer and exporter of cotton. In 2022, the Cotton Campaign and other agencies, including the US Government, lifted all bans on the import of cotton that had been imposed due to international human rights concerns.
Uzbekistan is also a major producer of gold, with the largest open-pit gold mine in the world. The country has substantial deposits of silver, strategic minerals, gas, and oil. Since 2016, significant economic reforms have been undertaken in Uzbekistan. In 2017, the country liberalised its currency, allowing freer flows of foreign currency and facilitating the import and export of goods, as well as opening the path to foreign investment.Uzbekistan Reforms: Status, Outlook and Risks.fitchratings.com. Retrieved 2024-02-07 Tax reforms in 2019 also allowed for company consolidation, tax simplification, and the professionalisation of the private sector. The government is also committed to the privatisation of state-owned enterprises (SOEs), with the domestic IPO of UzAuto expected in 2022.
The Uzbekistan Economic Forum, run by the Ministry of Finance, brings together IFIs, businesses, government officials, and other stakeholders on an annual basis. The first forum was held in Tashkent, and the second Uzbekistan Economic Forum took place in Samarkand. In December 2022, the Uzbek government received a loan of almost US$1 billion from the World Bank to 'implement strategic reforms'.
History During the Soviet era, Uzbekistan's economy was centrally planned and designed to specialise in agricultural production, specifically cotton, which was famously dubbed the 'white gold' of the Soviet economy. Following independence in 1991, the country experienced an economic downturn but avoided rapid shock therapy. The government instead maintained heavy state control over key industries, currency exchange, and agriculture, which involved heavy reliance on forced labour during the annual cotton harvest. While the country benefited from immense mineral wealth (including vast gold reserves and natural gas deposits), closed borders and restrictive foreign investment limited broader economic progress.
In 2017, with the launch of comprehensive economic reforms, the Uzbek government liberalised its currency by allowing it to float freely, significantly reduced its trade barriers, and actively courted foreign investment. The state officially eliminated the system of forced labour in the cotton sector and began transitioning its agricultural focus towards food self-sufficiency and high-value exports.
GDP and employment This is a chart depicting the trend of the gross domestic product in Uzbekistan in constant prices of 1995, estimated by the International Monetary Fund with figures in millions of sum. The chart also shows the consumer price index(CPI) as a measure of inflation from the same source and the end-of-year U.S. dollar exchange rate from the Central Bank of the Uzbekistan database. For purchasing power parity comparisons in 2006, the U.S. dollar is exchanged at 340 som.
Year GDP (constant prices) US Dollar Exchange CPI (2000=100) 1992 330,042 1 soum 0.07 1995 302,790 36 soum 20 2000 356,325 325 soum 100 2003 402,361 980 soum 166 2006 497,525 1,240 soum 226
Uzbekistan's GDP, like that of all CIS countries, declined during the first years of transition and then recovered after 1995, as the cumulative effect of policy reforms began to be felt. It showed robust growth, rising by 4% per year between 1998 and 2003, and accelerating thereafter to 7–8% per year. In 2011 the growth rate rose to 9%.
Given the growing economy, the total number of people employed rose from 8.5 million in 1995 to 13.5 million in 2011. This increase of nearly 25% in the labor force lagged behind the increase in GDP during the same period (64%, see chart), which implied a significant increase in labor productivity. Official unemployment is low: less than 30,000 job seekers were registered in government labor exchanges in 2005–2006 (0.3% of the labor force). Underemployment, on the other hand, is quite high, especially in agriculture, which accounts for fully 28% of all employed, many working part-time on small household plots.
The minimum wage, public-sector wages, and old-age pensions are raised twice a year to ensure that base income is not eroded by inflation. Although no statistics are published on average wages in Uzbekistan, pensions as a proxy for the average wage increased significantly between 1995 and 2006, both in real terms and in U.S. dollars. The monthly old-age pension increased in real (CPI-adjusted) soums by almost a factor of 5 between 1995 and 2006. The monthly pension in U.S. dollars was around $20–$25 until 2000, then dropped to $15–$20 between 2001 and 2004, and now is $64. The minimum wage was raised to $34.31 in November 2011.Ferghana.Ru Information Agency , October 24, 2007 Assuming that the average wages in the country are at a level of 3–4 times the monthly pension, we estimate the wages in 2006 at $100–$250 per month, or $3–$8 per day.
According to the forecast by the Asian Development Bank, the GDP in Uzbekistan in 2009 was expected to grow by 7%. Meanwhile, in 2010 the Uzbekistan GDP growth is predicted at 6,5%.
Work force and vocational training
Literacy in Uzbekistan is almost universal, but in order to meet labor force needs, hundreds of students are sent to the United States, Europe, and Japan for university degrees, after which they commit to working for the government for 5 years. About 60% of students who study abroad find employment with foreign companies upon completing their degrees despite their commitment to work for the government.
In addition, Uzbekistan subsidizes studies for students at Westminster International University in Tashkent—one of the few Western-style institutions in Uzbekistan. In 2002, the government "Istedod" Foundation (formerly as "Umid" Foundation) paid for 98 out of 155 students studying at Westminster. For the following academic year, Westminster admitted 360 students, with Istedod paying for 160 students. Tuition is $5,200 per academic year.
In 2008 the Management Development Institute of Singapore at Tashkent opened to provide high quality education with international degrees. Tuition fee was $5000 in 2012. In 2009 the Turin Polytechnik University was opened. It is the only university in Central Asia that prepares high quality employees for industries.
With the closing or downsizing of many foreign firms, it is relatively easy to find qualified employees, though salaries are very low by Western standards. Salary caps, which the government implements in an apparent attempt to prevent firms from circumventing restrictions on withdrawal of cash from banks, prevent many foreign firms from paying their workers as much as they would like. Labor market regulations in Uzbekistan are similar to those of the Soviet Union, with all rights guaranteed but some rights unobserved. Unemployment is a growing problem, and the number of people looking for jobs in Russia, Kazakhstan, and Southeast Asia is increasing each year. Uzbekistan's Ministry of Labor does not publish information on Uzbek citizens working abroad, but Russia's Federal Migration Service reports 2.5 million Uzbek migrant workers in Russia. There are also indications of up to 1 million Uzbek migrants working illegally in Kazakhstan.International Crisis Group, Uzbekistan: Stagnation and Uncertainty , Asia Briefing N°67, 22 August 2007 Uzbekistan's migrant workers may thus be around 3.5–4 million people, or a staggering 25% of its labor force of 14.8 million. The U.S. Department of State also estimates that between three and five million Uzbek citizens of working age live outside Uzbekistan.U.S. Department of State, Background Notes on Uzbekistan , March 2007
After acknowledging the need for more higher education to support labor market needs, new programs were opened and cooperation commenced with foreign universities. Moreover, private higher education providers started to emerge on the market to provide students with necessary skills, knowledge and competencies required on the labor market. One of the private universities in Tashkent TEAM University aims at development of skills necessary for starting entrepreneurial activities, thus contributing to development of businesses and private enterprises.
Fiscal and monetary policy Uzbekistan experienced galloping inflation of around 1000% per year immediately after independence (1992–1994). Stabilization efforts implemented with active guidance from the International Monetary Fund rapidly paid off, as inflation rates were brought down to 50% in 1997 and then to 22% in 2002. Since 2003 annual inflation rates averaged less than 10%.IMF World Economic Outlook Database , October 2007
The severe inflationary pressures that characterized the early years of independence inevitably led to a dramatic depreciation of the national currency. The exchange rate of Uzbekistan's first currency, the "notional" rouble inherited from the Soviet period and its successor, the transient "coupon soum" introduced in November 1993 in a ratio of 1:1 to the rouble, went up from 100 roubles/US$ in the early 1992 to 3,627 roubles (or coupon soum) in mid-April 1994. On July 1, 1994, the "coupon soum" was replaced with the permanent new Uzbek soum (UZS) in a ratio of 1000:1, and the starting exchange rate for the new national currency was set at 7 soum/US$, implying an almost two-fold depreciation since mid-April. Within the first six months, between July and December 1994, the national currency depreciated further to 25 soum/US$ and continued depreciating at a fast clip until December 2002, when the exchange rate had reached 969 soum/US$, i.e., 138 times the starting exchange rate eight and a half years earlier or nearly 10,000 times the exchange rate in early 1992, soon after the declaration of independence.Central Bank of Uzbekistan database , February 2008 Then the depreciation of the soum virtually stopped in response to the government's stabilization program, which at the same time dramatically reduced the inflation rates. During the four years that followed (2003–2007) the exchange rate of the soum to the US dollar increased only by a factor of 1.33, from 969 soum to around 1,865 soum in May 2012.