TASHKENT

Uzbekistan’s central bank kept its main rate unchanged at 14 percent on Thursday to maintain the balance between economic activity amid inflationary pressures amid the aggravated COVID-19 pandemic situation.

The bank said it had widened the interest rate corridor to plus/minus two percentage points from plus/minus one percentage point, meaning that the central bank provided short-term resources to banks at 16 percent and absorbed them at 12 percent.

The regulator’s decision was based on some key factors, including high inflation expectations, an unchanged inflation target of 10 percent by the end of the year, as well as a faster than expected recovery in economic activity, Behzod Hamroev, the deputy chairman of the central bank, told reporters.

As liquidity poured into the economy, risks associated with high inflation expectations and food supply issues required the central bank to keep the current monetary conditions and make some corrections to the monetary policy toolkit, he said.

An acceleration of economic activity has continued in the second quarter of this year, and in many sectors of the economy, the growth rates reached pre-pandemic levels. In the first half of 2021, the real Gross Domestic Product (GDP) grew 6.2 percent.

The industry and services sectors (8.5 percent and 18.3 percent, respectively)returned to their pre-pandemic growth rates, while agriculture (1.8 percent) and construction (0.1 percent) did not show significant growth this year due to them recording an already high rate of growth in 2020, according to the bank.

The bank said it would closely monitor inflationary factors and potential risks coming from external and internal sources, and would “take appropriate measures to eliminate them,” Hamroev said.

Policymakers have kept the key rate unchanged since September last year. Uzbekistan forecasts 10 percent inflation this year, a rate the government wants to halve to 5 percent by 2023. As well as bringing inflation down, it is hoping to significantly boost economic growth.

Earlier this year, the central bank said real GDP growth in 2021 would be 1.0-1.3 percent higher than the initial forecast that had been made in the first quarter and was expected to be in the range of 5.8-6.8 percent. President Shavkat Mirziyoyev urged his ministers to find ways to spur growth to 6 percent this year,  a rate that exceeds most economists’ forecasts.