UZBEKISTAN: S&P assigned 'BB-' long-term and 'B' short-term ratings to Uzbekistan, outlook stable

22 January 2019 — Marina MAGNAVAL
On December 21, 2018 S&P Global Ratings assigned its 'BB-/B' long-term and short-term foreign and local currency sovereign credit ratings to Uzbekistan. The outlook is stable, as the agency informed.

The ratings are supported by the government's strong fiscal and external positions. At the same time the ratings are constrained by Uzbekistan's low economic wealth, as measured by GDP per capita, future policy, which is difficult to predict, highly centralized decision-making process, low monetary policy flexibility. Notwithstanding the positive trend in strengthening institutions, based on S&P forecast period through 2021, real GDP growth is expected at average 5%, supported by growth in the services, manufacturing and natural resources sectors. But at that the economy has been government led for many years (the government contributes an estimated 60% of GDP). Uzbekistan has a significant endowment of natural resources, thus, globally the country is one of the top 20 producers of natural gas, gold, copper, and uranium. Uzbekistan's population is young: almost 90% is at or below working age, presenting an opportunity for labor supply-led growth.

Uzbekistan's banking system remains relatively stable, despite the government's large devaluation of the Uzbekistani sum in 2017. Reported asset quality remains good in 2018 with reported nonperforming loans of about 1.3%. Uzbekistan is in a strong net external asset position. S&P estimates its external liquidity (gross external financing needs to current account receipts plus usable reserves) at 90%.

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