The Asian Development Outlook 2011 Update (ADO Update) said that the economy of Uzbekistan will grow by 8.4% in 2011 and 8.5% in 2012 respectively.

The publication said that the economy grew by 8% in the first half of 2011, on a par with first half 2010 growth. The ADO Update maintains its April GDP growth forecasts for 2011 and 2012, on the back of projections of a continued increase in exports and workers’ remittances, hikes in public sector wages and social benefits, and a sustained large public sector investment program.

Inflation, reported at 6% for the first 6 months of 2011, did not exceed the official target of 7%. But as higher global commodity prices, augmented by a steady depreciation of the local currency, have heightened inflationary pressures, the Update lifted the 2011 forecasts for inflation from 8.8% to 10% and 2012 forecasts from 8.5% to 9.5%.

The budget posted a small surplus in the first half of 2011. With significant surpluses from the national Fund for Reconstruction and Development underpinned by strong earnings from energy exports, the consolidated budget surplus is expected to be close to 4.0% of GDP. The government’s industrial modernization program continued to support increased infrastructure spending, helping to sustain high growth.

Moreover, investment was bolstered by $1.2 billion of foreign direct investment in the first half of 2011, the majority going into energy and chemicals.

Export performance was strong in the first 6 months of 2011. Economic recovery in the Russian Federation, the major trade partner, and favorable international prices for precious metals and cotton, as well as stronger manufactured exports (especially automobiles) led to merchandise export growth of 18.7%. Merchandise imports concurrently grew by 22.0%, mainly on account of rising prices for food, increased demand for consumer goods, and larger imports of capital goods and materials for infrastructure and other investments.

As economic developments closely track prospects outlined in April, the Update maintains its forecasts for the current account surplus in both years – 16.3% of GDP in 2011 and 12.6% of GDP in 2012.