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23/October/2020   Economy

Central Bank presents three scenarios of macroeconomic development


TASHKENT, October 23. /Dunyo IA. The Central Bank of Uzbekistan on October 22 approved the main directions of monetary policy for 2021 and the period 2022-2023, reports IA “Dunyo” correspondent.

In all three scenarios, the Central Bank's target of 5% inflation by the end of 2023 and its ongoing goals to ensure the stability of the banking and payment systems will remain unchanged.

"2020 was a very difficult year for our country and the global economy. The crisis, which began under the influence of the global pandemic, is characterized by simultaneous deterioration of bоth internal and external economic conditions and fluctuations in supply and demand. The global economy and the main foreign trade partners of our country are experiencing economic decline against the background of a sharp slowdown in economic activity, falling commodity prices and instability of financial markets," the Central Bank notes.

Taking into account the degree of uncertainty, the forecasts were developed based on three different scenarios:

• main (a gradual recovery of the economy);

• optimistic (faster recovery);

• risky (slower recovery).

In all three scenarios, the Central Bank's target of 5% inflation by the end of 2023 and its ongoing goals to ensure the stability of the banking and payment systems will remain unchanged.

Main scenario

If the situation with the pandemic gradually improves. As the economies of foreign trade partners recover gradually, external demand will reach the pre-crisis level in the second half of 2022.

Economic activity and aggregate demand in the country will approach pre-crisis levels by the end of 2021, and the economy will return to its potential level by 2023.

Budget revenues will restore. The consolidated budget deficit is projected to fall to 2.5% of GDP in 2022. Structural reforms will continue and regulated prices will be liberalized in 2022-2023.

The current "relatively tight" monetary policy environment will continue until the end of 2021.

Optimistic

If the situation around pandemic improves faster, and there will be no quarantine anymore, antiviral vaccines and medicines will be available globally from the second half of 2021.

Due to the gradual recovery of the economies of major trading partners, external demand is expected to reach pre-crisis levels in the second half of 2021, and the price of gold will decline as the global economy recovers.

Domestic economic activity and aggregate demand are expected to approach pre-crisis levels by mid-2021, and the economy will reach its potential by 2022.

At the same time, in contrast to the main scenario, it is planned to revive the growth rates in the transport, services and tourism sectors.

Together with the recovery of economic activity, state budget revenues will grow relatively faster, and the consolidated budget deficit will decrease to 2% in 2022.

At the same time, the logical completion of the process of liberalizing regulated prices in 2022-2023 and attracting FDI are among the key factors of economic growth.

In the case of an optimistic scenario, the current "relatively tight" monetary policy conditions will be maintained. At the same time, the inflation rate in 2021-2022 will be slightly lower than in the baseline scenario.

Risky

If the global situation will worsen and global constraints will continue in the years 2021-2022.

The economies of foreign trade partners will recover slowly, external demand will reach the pre-crisis level only in the second quarter of 2023, gold prices will continue to grow.

Under the risky scenario, domestic economic activity and aggregate demand are projected to reach pre-crisis levels only by the end of 2022, the economy will reach its potential level after 2023, and the consolidated budget deficit will remain at 6-7%.

Under this scenario, the process of liberalizing regulated prices is likely to be delayed until 2023.

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