Publication: Monitor Volume: 7 Issue: 81

According to data recently released by Uzbekistan’s government, GDP grew by 4 percent in 2000. This figure suggests that the solid but unspectacular growth which characterized official reporting of Uzbekistan’s economy in the second half of the 1990s continued last year. In light of the strong growth performance reported by the other Central Asian economies last year, as well as Tashkent’s well-known official fudging of its GDP data, this figure seems quite low, and suggests that Uzbekistan’s economy may be grinding to a halt.

The official numbers show that the expansion was driven primarily by the industrial sector, which reported 6-percent growth last year. This was due primarily to 70-percent reported growth in engineering, as well as 19-percent production growth in ferrous metallurgy, a 37-percent increase in silk production and a 50-percent increase in output of pharmaceuticals. Agriculture was hit by drought and this sector accounts for about a quarter of total output. Nonetheless, 3-percent growth was reported in agriculture as well. Favorable international prices for energy, gold and cotton–Uzbekistan’s key exports–as well as a broad recovery taking hold in Uzbekistan’s major CIS trading partners (especially Russia) can also explain much of this reported growth.

But a number of factors suggest that these numbers should not be taken at face value. For one thing, the IMF and the World Bank dispute Tashkent’s statistical methodology. These organizations argue that, by understating inflation (especially in the industrial sector), the official methodology overstates the growth in real output which corresponds to a given increase in nominal GDP. This problem is shared by Turkmenistan and Belarus–the only other CIS countries that do not observe international statistical practices, under quality control exercised by the IMF.

This problem is apparent in the inconsistency between the 70-percent output growth reported for the engineering sector, and the collapse of production in the engineering sector’s key branch, automotive products. Production of cars and trucks plummeted by 47 percent in 2000, while domestic vehicle sales dropped 42 percent. This was collapse was due in part to problems at UzDaewoo, Uzbekistan’s flagship joint venture which assembles cars and mini-buses. Daewoo Motor Company’s ongoing bankruptcy made as deliveries of components from Korea became erratic. Domestic sales of UzDaewoo cars shrank 71 percent, a drop which suggests sharp declines in the purchasing power of Uzbekistani households. The Uzbek som’s continued overvaluation also made UzDaewoo cars and trucks more expensive on the Russian and other CIS markets, limiting sales there as well. The long-term viability of UzDaewoo is in doubt now that Daewoo is planning to spin off its unprofitable foreign manufacturing and sales network as it concentrates on reviving its Korean operations (Financial Times, March 20, 2001).