Russia’s war on Ukraine causes brief Uzbek economic boost

Uzbekistan’s economy has benefited from Russia’s war on Ukraine. But the positive effect is already on the wane, and if the war drags on it will begin to have an adverse impact, an Uzbek economist said.  

In 2022 the Uzbek economy grew by 5.7 percent thanks to a 33.4 percent rise in exports, according to the country’s Central Bank, economist Yuliy Yusupov said on Wednesday at a Central Asian Think Tanks Forum in Astana.

The rise in exports is mainly due to an increase in goods sold to Russia, as a direct consequence of the war in Ukraine, which opened gaps on the Russian markets for Uzbek food stuffs, textiles and chemical products.

The increase also included ‘parallel exports’ to Russia of such goods as clothes, air conditioners, washing machines, TV sets, printers and tractors, according to Yusupov.

Officially, ‘parallel exports’ to Russia amounted to 300-400m dollars, but, Yupusov said, the real figures were probably higher.

Yusupov said that, contrary to expectations, the number of Uzbek labour migrants in Russia has not gone down significantly since the start of the war because of a high demand for workers there. There were around 1.4m-1.6m Uzbek migrants in Russia in 2022, compared to 1.2m-1.5m in 2021.

At the same time, Uzbekistan received, by the most cautious estimates, about 200,000 Russian migrants in 2022, and 60,000 more in 2023. This caused an inflow of cash and an increased demand for some services and goods, Yusupov said.

Money transfers to Uzbekistan increased by 92 percent in the first year after the start of the Russian invasion – amounting to 18.6bn dollars, or 23.1 percent of the country’s GDP in 2022.

There was also a rise in Russian economic investment and loans to Uzbekistan – they made up 20.3 percent of all direct foreign investment and borrowing in 2022.

The Uzbek financial sector saw growth thanks to increased financial operations between Russia and Uzbekistan. More than 60,000 non-resident accounts were opened at Uzbek banks in 2022, with deposits worth 892m dollars, Yusupov said.

The arrival of some 3,000 IT specialists from Russia and Belarus has promoted growth in the Uzbek IT sector, he added.

On the negative side, the Russian-Ukrainian war has contributed to higher inflation (12.3 percent in 2022), and a rise in prices for services and consumer goods.

Trade with Russia is creating a risk of secondary sanctions, which have already been imposed on some Uzbek companies, Yusupov said, without giving details.

He said that the positive impact of the war on the Uzbek economy has been on the wane since March this year. The weakening of the Russian rouble is having a domino effect on the Uzbek som.

Also, in the first five months of 2023, exports to Russia dropped by 24 percent compared with the last nine months of 2022.

Money transfers from Russia fell by 35 percent in the first six months of 2023 on the second half of the previous year.

Yusupov said that as the Russian-Ukrainian war continues, its economic impact on Uzbekistan is likely to become increasingly negative.

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