Inflation in Uzbekistan Driven Equally by Demand and Supply, Central Bank Says

Inflation in Uzbekistan is driven almost equally by demand and supply factors. According to the Central Bank, demand accounts for 49% of price growth, while supply explains 51%. At the same time, the dominant drivers have changed from year to year, ranging from the pandemic to tariff increases.

During the pandemic, inflation was mainly driven by supply-side factors. Disruptions to supply chains and production stoppages pushed food prices higher. The sharpest increases were recorded for grain, flour, meat and dairy products.

After restrictions were lifted, consumer spending increased. Government expenditure and household incomes also rose. As a result, inflation became largely demand-driven. At the beginning of 2021, demand accounted for most of the roughly 10% annual inflation rate.

From mid-2022, the role of demand began to decline. Prices increasingly rose due to higher tariffs for utilities and transport, as well as seasonal increases in food prices. In the second half of 2023, around 70% of price growth was explained by these factors.

In 2024, inflation remained at about 10%. The main contribution came from rising prices in services. A key factor was the liberalisation of energy tariffs. At the same time, demand continued to play a noticeable role in food and non-food segments.

What is considered demand and supply

Demand factors:

• Growth in household incomes
• Higher budget spending
• Active lending
• Investment

These factors lead to a situation in which prices and consumption rise at the same time.

Supply factors:

• Higher energy and raw material prices
• Disruptions in logistics
• Production constraints
• Tariff decisions affecting utilities, transport and services

In this case, prices rise while consumption declines.

Kursiv also reports that the Board of the Central Bank of Uzbekistan has decided to maintain the key policy rate at 14% per annum, effective from December 11.