Agriculture and services have become the main drivers of Uzbekistan's business climate in 2023

Agriculture and services have become the main drivers of Uzbekistan's business climate in 2023

The business climate is an analytical indicator that is calculated monthly based on the estimates of enterprises participating in the survey conducted by the Center for Economic Research and Reforms since 2020. 1,000 business representatives across the country take part in monthly surveys. The importance of the data received is their efficiency. Based on the answers, a summary indicator of the business climate is calculated, which takes into account business conditions and future prospects.

Composite Business Climate Index

An analysis of the dynamics of business climate indicators showed that the consolidated indicator did not experience sharp fluctuations in 2023, remaining in a positive area. A sharp jump to 65 points occurred in July, and the largest decline in business activity was noted in November – up to 52 points.

The Q1 of 2023 was characterized by a consistent increase in business optimism, driven largely by growth in agriculture and services.

In the following months, up to and including June, there was a correction in the level of optimism, when the composite indicator fell to 57 points, and reached its peak of 65 points in July. The peak values were achieved due to a significant increase in indicators in agriculture and in the service sector – up to 70 and 67 points.

At the same time, the July survey results reflected an increase in business optimism at the level of 80 points in construction, industry, agriculture and the service sector.

From August to December, the consolidated business climate indicator was set at an average of 54 points. At the same time, positive fluctuations of up to 59 points were observed in agriculture and services.

The study also showed a slight decrease in estimates of changes in the business climate by the end of the year in the fields of industry and construction. In particular, from September to December, the business climate in industry fell from 57 to 42 points, and in construction – from 53 in October to 45 points in December, which is due to the deterioration of the current state in these industries.

The current state of the business climate

The main contribution to improving the current state of business during the year was made in agriculture – up to 59 points and services – up to 55 points.

From January to March, the current state of the business climate in all areas, with the exception of construction, reflects the general growth trend. This steady development continued only in the industrial sector, when fluctuations were observed in other sectors.

The current state of the business has stabilized at the level of 43 points from August to December. A significant jump was observed only in the field of agriculture: an increase from 25 points in September to 51 and a further correction to the level of 36 points in December. On the other hand, the construction sector showed a moderate decline from 58 points in September to 32 in December.

Over the year, the proportion of entrepreneurs who rated the current state of business as good ranged from 40% to 47%. At the same time, the highest level of the current state of business among the industries was noted in the field of agriculture – 52% in February and June, and the lowest in construction – 27% in February.

Expectations of business development prospects

The consolidated indicator of expectations regarding business development prospects in the first three months of 2023 averaged 72 points, signaling an extremely high level of optimism among entrepreneurs.

During the year, the expectations of the companies remained at high levels. In particular, until August, the indicator held up to 80 points, without significant fluctuations, and only by the end of the year, having decreased, it varied in the range from 61 to 66 points.

According to the results of January-April 2023, the share of companies expecting an improvement in the overall business condition in the next three months remained at a high level – 81%, and by the end of the year it stabilized to 72%.

The service sector showed particular fluctuations from the general trend, remaining at a high level: from 78% in January to 73% in May, and from 80% in August to 68% in October.

In each month, the relationship between the current state and expectations showed a positive trend in the development of the economy, which continued for the next three months.

Barriers to doing business

An analysis of obstacles by the business community at the end of the year showed that, on average, 53% of entrepreneurs stated that there were no barriers to doing business. This indicator remained at 49% in the first four months of the year before gradually starting to grow, reaching a maximum of 58% in June. Towards the end of the year, there was a moderate decrease to the initial level with a small intermediate jump.

The barriers that have the greatest impact on doing business include: difficulties in accessing finance, reported by 15% of company executives and land plots – 7%; tax administration – 7%; high tax rates – 6%; electricity supply – 6%.

If entrepreneurs from the industrial sector were most concerned about access to finance, with an average of 19% of respondents, then representatives from agriculture were most concerned about obstacles related to water supply, with an average of 10%. During the year, the construction sector, more than other industries, cited tax administration as an obstacle – 7% and corruption – 3%.

Feruzbek Davletov, CERR
Phone.: (+998) 78 150-02-02 (416)

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