The purpose of the mission was to review economic and financial developments in 2008 and assess the outlook for 2009 in light of the recent developments in the world economy and the authorities’ policy intentions. The mission expressed gratitude to the authorities for their excellent cooperation and the constructive discussions.

In 2008, Uzbekistan has remained resilient to the ongoing international credit crisis and the downturn in developed economies, with real GDP growth of 9 percent (according to official statistics), large external current account and fiscal surpluses, further accumulation of foreign exchange reserves, and continued stability in the banking system. The increase in inflation has been contained, though its level remains high.

Uzbekistan will be affected in 2009 by the major downturn in the world economy through the decline in prices of Uzbekistan’s major export commodities, weaker demand for Uzbek exports due to lower growth in major trading partners, and the decline in remittances. The Uzbek economy is not integrated with the financial markets in developed countries and therefore is unlikely to suffer significantly from credit constraints or sharp falls in capital flows.

With its strong macroeconomic position, Uzbekistan has considerable resources to finance well-targeted policies to support growth. The challenge is to mitigate the impact of the global crisis on economic growth through timely and well-targeted policies, while ensuring continued financial stability and reductions in inflation. The Fund staff stands ready to assist the authorities as they address these challenges.

Taking into account the broad range of policies envisaged by the authorities to stimulate domestic demand, including appropriately expansionary fiscal and cautious monetary policies, the mission expects the economic outlook to remain relatively favorable in 2009, with a limited slowdown in growth and continued external and fiscal surpluses. The mission recommended against reacting to the global crisis by increasing protectionist measures and implementing foreign exchange restrictions.

The authorities and the mission agreed on the importance of enhancing the role of banks in economic activity. The mission encouraged the authorities to further enhance confidence in the banking system by removing the noncore functions from banks and facilitating the availability of cash, and welcomed the authorities’ intention that any increases in the share and interventions of the government in banking sector activities will be temporary measures.

The mission welcomes the progress made in improving balance of payments data and the authorities’ commitment to address issues related to national income and price statistics.