Uzbekistan Economic Performance in 2023, Country’s Future Development and the Karakalpakstan’s Issue

Money of Uzbekistan
Uzbekistan’s national currency (Credits: Peretz Partensky from San Francisco, USA, CC BY-SA 2.0, via Wikimedia Commons)

Geopolitical Report ISSN 2785-2598 Volume 38 Issue 10

In 2023, the World Bank reported positive economic growth in Uzbekistan. However, the broader macro region, which encompasses Central Asia and Europe, presents intriguing dynamics. Despite the economic upturn, the Central Asian republic continues to grapple with pressing domestic challenges.

Foremost among these concerns is the imperative of economic modernisation. The need to adapt and evolve economic structures is palpable, demanding swift and effective policy responses.

Additionally, the management of affairs in the Republic of Karakalpakstan remains a critical focal point. Navigating the intricate socio-economic landscape of the region requires strategic foresight and comprehensive approaches.

As the Central Asian republic strives for sustained progress, addressing these internal challenges becomes paramount for fostering stability and ensuring continued economic advancement.

Key Findings

  1. The projected economic growth for Uzbekistan is 5.5% in 2023, with consistent estimates for the next two years.
  2. Europe + Central Asia region experienced sped up growth at 2.7%, driven by domestic demand, labour market stability, and growth in Russia and Ukraine.
  3. Positive economic trends in Uzbekistan cannot hide the country’s necessity to modernise and diversify its economy and face domestic issues coming from Karakalpakstan.

Uzbekistan’s Economy:
Background Information

The World Bank’s World Economic Prospects report shows that Uzbekistan’s economic growth surpassed initial predictions, reaching 5.5% in 2023, with a similar forecast for the next two years.

Despite implementing expanded social protection programs, the expected progress in poverty reduction in Uzbekistan faces constraints because of a deceleration in remittances and private consumption.

Projections indicate a marginal decrease in the national poverty rate, expected to reach 13.9% in 2023. However, there are potential downside risks that loom over this outlook. These encompass the possibility of Russia’s economic performance deteriorating, heightened external inflationary pressures, and unexpectedly stringent global financial conditions.

Conversely, there are upside risks that could positively influence the economic landscape. These include the potential for elevated global prices of gold, natural gas, and copper, along with enhanced productivity resulting from ongoing structural reforms.


Diverse growth patterns characterise the economic situation in Europe and. While Central Europe and the Western Balkans experienced subdued growth because of weak external demand in the Eurozone, Central Asia witnessed an acceleration driven by remittances in Armenia, Kyrgyzstan, and Tajikistan.

 Eastern Europe saw positive growth trends, notably in Ukraine, where growth reached 4.8%, although output remained below pre-invasion levels.

However, risks persist, with inflation above target in most countries and monetary policy tightening in Turkey and Russia. Forecasted growth for the ECA region in 2024 is 2.4%, with a subsequent increase to 2.7% in 2025, dependent on factors like private consumption and exports. The Ukraine conflict and the Western sanctions against Moscow introduce uncertainties, affecting the region’s economic prospects.

The National Development Strategy (NDS) of Uzbekistan, implemented in September 2023, represents a crucial milestone as the country charts its developmental course until 2030.

This marks the third iteration of the NDS since 2017, reflecting the government’s commitment to long-term planning. The NDS until 2030 articulates the country’s ambitious goals, aiming to ascend to upper-middle-income status through sustainable economic development, aligning education, healthcare, and social protection systems with international standards, and fostering an environmentally conducive framework.

With a focus on five key areas, including individual self-fulfilment, sustainable economic growth, water resource conservation, environmental protection, and citizen-centric public administration, the strategy outlines 100 priority actions crucial for advancement.

Looking ahead to 2023, the economic outlook suggests a growth rate hovering around 5.5%, albeit with challenges. The economic outlook suggests that remittances from Russia declining may impact poverty reduction efforts by causing a decrease in consumption growth.

The anticipation is that import growth will quicken, bolstering economic modernisation, but also causing the current account deficit to widen. Analysts project that factors such as high energy tariffs and increased expenditure on various fronts will drive the expansion of the fiscal deficit.

Shavkat Mirziyoyev’s leadership in Uzbekistan has witnessed a consolidation, albeit against the backdrop of challenges emanating from Constitutional reforms declared in 2022. While these reforms stirred popular discontent, the situation escalated into a crisis within the Republic of Karakalpakstan.

Despite the constitutional changes, Mirziyoyev administration faced criticism from human rights organisations and Karakalpak activists abroad, specifically concerning the perceived severity of Tashkent’s countermeasures to quell the protests in the region.

As of today, Karakalpakstan remains a significant challenge for the central government, underscoring the ongoing complexities in navigating political dynamics and addressing regional concerns within Uzbekistan.

Risk Assessment

  • Country Risk. Uzbekistan’s economic trajectory shows robust growth, surpassing initial projections and reaching 5.5% in 2023. However, challenges in poverty reduction persist because of a slowdown in remittances and private consumption. The marginal decrease in the national poverty rate to 13.9% in 2023 shows a nuanced situation.
    Downside risks include the potential deterioration of Russia’s economic performance, heightened external inflationary pressures, and unexpectedly stringent global financial conditions. Upside risks, such as increased global prices for key commodities and enhanced productivity from structural reforms, provide balancing factors.
    Security risks include the situation in Karakalpakstan and the impact of Tashkent’s regional strategy in the relations with Western countries, especially considering the reports that NGOs and activities have shared to underline human rights violation in Uzbekistan.
  • Regional Risk. The economic situation in Europe and Central Asia (ECA) displays diverse growth patterns. Central Asia experiences acceleration driven by remittances, while Central Europe and the Western Balkans face subdued growth because of weak external demand. Eastern Europe, notably Ukraine, sees positive growth trends despite challenges post-invasion.
    However, inflation above target in several countries and monetary policy tightening in Turkey and Russia pose persistent risks. The Russian invasion of Ukraine introduces uncertainties impacting the economic prospects of the ECA region. These regional dynamics contribute to the complexity of Uzbekistan’s economic landscape.

Scenarios Analysis

  1. Economic Resilience Amid Global Challenges. Uzbekistan demonstrates economic resilience, successfully mitigating the impact of potential downturns in Russia’s economy and global financial challenges. Effective management of domestic reforms and diversification efforts shields the country from adverse external conditions, allowing sustained economic growth and poverty reduction.
  2. External Shocks Affecting Stability. External shocks, such as a severe downturn in Moscow’s economy and exacerbated global financial conditions, could significantly affect Uzbekistan’s economic stability. Reduced remittances and increased inflationary pressures may hinder poverty reduction efforts, necessitating adaptive policies to navigate the ensuing challenges. General dissatisfaction might trigger the situation in Karakalpakstan, causing local protests and increasing the country’s political risk.
  3. Positive Reforms and Global Windfalls. In a more optimistic scenario, Uzbekistan experiences positive outcomes from ongoing structural reforms, coupled with global windfalls in commodity prices. Elevated prices of gold, natural gas, and copper, combined with enhanced productivity, contribute to sped up economic growth, enabling effective poverty reduction. Socioeconomic development will benefit also the people in Karakalpakstan, generating trust in the current government.


Uzbekistan faces a dynamic economic landscape with both opportunities and challenges. To enhance resilience, the government should continue prioritising the effective implementation of the National Development Strategy (NDS) until 2030. Strategic diversification, prudent fiscal management, and responsive policies are vital.

Fostering regional collaboration amidst the uncertainties introduced by the Ukraine conflict is crucial. Monitoring global economic trends and adapting strategies accordingly will help to ensure sustainable development and navigating the intricacies of regional and national risks.

It is imperative for Tashkent to adopt a measured and stabilising approach towards the Republic of Karakalpakstan, steering clear of harsh strategies and avoiding any infringement on the human rights of its residents.

Failure to do so not only risks intensifying criticism from Western nations and non-governmental organisations, potentially prompting European governments to reevaluate their collaborations with Uzbekistan, but also raises the spectre of local discontent finding expression in forms such as ethnic nationalism, militancy, or providing fertile ground for jihadist propaganda.

The proximity to Afghanistan, where the Islamic State Khorasan Vilayat (ISKP) has demonstrated its activity and expressed a willingness to target Uzbek communities, adds a layer of urgency to addressing the challenges in Karakalpakstan with a balanced and inclusive approach.

For those with an interest in acquiring comprehensive insights into political and economic dynamics of Uzbekistan, we encourage you to reach out to our team by sending an email to We are poised to facilitate an assessment of the opportunity for you to obtain a meticulously crafted and specialised report tailored to your intelligence needs.

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