TASHKENT

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

The bank’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.

It said the current monetary conditions and positive expectations around the external economic situation increased confidence in being able to achieve the projected inflation rate.

An acceleration of economic activity has continued in the first eight months of this year, and in many sectors of the economy, growth rates reached pre-pandemic levels. In the first half of 2021, real gross domestic product (GDP) grew 6.2 percent.

The industry and services sectors (8.9 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  an already high rate of growth in 2020.

In January-July 2021, the volume of exports (excluding gold) amounted to $6.7 billion, 35 percent up from the same period last year. Imports rose by 19 percent year-on-year to $13.4 billion. Remittances to Uzbekistan rose by 35 percent year-on-year and amounted to $4.9 billion as of September 1, according to the bank.

“At the same time, the budget deficit is expected to rise due to an increase in the social benefits, pensions and wages from September 1, which will lead to a significant increase in consumer demand in the economy,” the central bank said in a statement.

The soum national currency has depreciated by 2 percent against the U.S. dollar since the beginning of the year.

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.

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.