Question - Answer
27/07/2020 - 16:32 2597
The situation in the world, taking into account the pandemic, has an impact on Uzbekistan. In the first quarter of this year, the rate of economic growth in our country decreased by 1.6 percent compared to the corresponding period last year. In addition, …
Director of the Department of Macroeconomic Policy, Analysis and Forecasting
Indeed, the worldwide coronavirus pandemic and the restrictions imposed by the government to combat it have led to a decline in economic activity in the country. Unlike previous crises, the current one caused by the coronavirus is characterized by a general decline in supply and demand. The slowdown in economic growth you noted in the first quarter is connected with this, and with the reduction in our foreign trade activity, and the quarantine measures adopted since March.
Meanwhile, the state authorities have repeatedly emphasized the priority of the people`s health not economic indicators. Therefore, despite the slowdown in economic activity, the necessary restrictions were applied to prevent the widespread dissemination of the disease.
Regarding your question - how should the state act during a crisis and what precautions can lead to fewer losses?
After studying international experience, measures have been taken to stimulate the economy and support entrepreneurship, help those who have lost jobs and the vulnerable strata of the population. These are, first of all, targeted fiscal and monetary measures implemented in a comprehensive manner.
What the fiscal measures are taken?
First, an Anti-Crisis Fund amounting 10 trillion sums was created to cover the expenses for carrying out sanitary and hygienic measures, treating infected people, keeping the most affected sectors of the economy afloat and create new jobs.
Secondly, in order to prevent the bankruptcy of enterprises, additional financial resources were allocated - in the form of subsidies, loans or prolongation of payments - to business entities in need and first of all, to business of the most affected areas.
Thirdly, funds from the Anti-Crisis Fund are aimed to be allotted for social support of the population, especially low-income families, and attracting the unemployed to public works. The number of families receiving benefits has increased.
Fourth, targeted support has been provided for sectors important for the sustainability of the entire economy - energy, chemicals, textile and electrical industries, construction, banking, tourism, healthcare. In particular, the calculation of personal income tax has been suspended for more than 3.1 thousand individual entrepreneurs engaged in tourism. By the end of the year, over 3,700 subjects of tourism, hotel services and aviation were exempted from property and land taxes, and the amount of social tax for them was reduced - from 12 to 1%.
Fifth, a list of 2,424 additional infrastructure projects has been formed for the construction, reconstruction and equipment of healthcare institutions, irrigation and reclamation facilities, drinking water supply and sewerage systems. The expenses have been covered from the Anti-Crisis Fund.
Sixth, agricultural production was almost not affected by quarantine restrictions. Timely financing and implementation of all agricultural activities are secured.
Seventh, special attention is paid to resolving the issue of employment of labor migrants returning to the country due to the pandemic. In particular, 165.7 billion sums were allocated from the public works fund, 231.9 thousand people were involved in public works.
What the monetary measures are implemented?
To maintain financial stability, banks are provided with the necessary liquidity, and business entities are supported by the use of monetary instruments. In particular, the base rate of the Central Bank was reduced from 16 to 15%, REPO operations were carried out to provide banks with liquidity. In addition, the easing of reserve obligations by the Central Bank (MZJ) allowed commercial banks to channel additional funds into the economy.
The volume of loans issued in January-June this year amounted to 58.6 trillion sums (for the corresponding period last year - 65.4 trillion sums). Banks provided business entities with a deferral of loan payments for 24.5 trillion sums.
As a result of these measures, according to preliminary calculations of the State Statistics Committee, the volume of nominal GDP in the first half of 2020 amounted to 255.3 trillion sums, an increase of 0.2 percent compared to the corresponding period last year. For comparison, in the first half of the year in many countries of the world an economic decline of 10-20 percent is expected.
At the same time, growth in the construction sector reached 7.3 percent, agriculture, forestry and fisheries - 2.8 percent, services - 2.6 percent, consumer goods - 1.2 percent and retail - 0.7 percent. The volume of exports decreased by 22.6 percent, imports - 18.2 percent, investments - 12.8 percent, industrial production - by 1.9 percent.
Unfortunately, a sharp increase in the incidence since July this year has forced the state to reinforce quarantine measures again from July 10 to August 1. This, in turn, can lead to a decrease in economic activity.
For this reason, returning to your question, I believe that in order to achieve the lowest economic losses in Uzbekistan today, the main attention should be paid to the key problem - strengthening the health system. The main factors to stimulate the economy should be the early easing of quarantine measures and the refusal to return strong restrictions. The sooner people realize this and begin to strictly comply with the established measures, the sooner it will be possible to ease the restrictions due to the improvement of the epidemiological situation, as well as reduce economic losses.
Information Service of the Ministry of Economic Development
and Poverty Reduction of the Republic of Uzbekistan