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Strategy of Uzbekistan №02 (2020) / ISSN 2181-2535 DOI http://dx.doi.org/10.24412/2181-2535-2020-2-46-51 Journal home page: https://journal.strategy.uz
WHAT IT TAKES TO MITIGATE THE IMPACT OF THE CRISIS
FOR UZBEKISTAN?
Due to COVID-19 quarantine measures since March 2020, the threat to the global economy has hit its peak since the last crisis.
The consequences of this negative trend in the global economy will naturally have an impact on Uzbekistan, as part of the global economy. Despite the fact that Uzbekistan, like developed countries, does not have a high level of interdependence, " ongoing serious
them have
an impact on the
economy.
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HOW WILL THIS AFFECT UZBEKISTAN?
First, the real sector of the economy could be severely affected. Due to the quarantine, most sectors of the economy have been suspended, which could lead to a decrease in demand in the economy, especially for goods and services, as well as to a slowdown in activity in this sector.
S
econd, the
employed
population in Uzbekistan makes up 13.5 million people. Of these, 7.8 million people work in the informal sector, and 1.3 million are unemployed citizens. In this context, the situation of the 9.1 million people may turn out to be challenging.
69.1 percent of the total income of the population is considered income from employment, while 42 percent is considered income from self-employment. This suggests that as a result of a decrease in the income of the population, especially informally working and self-employed, a large part of the population as a whole may be left without income.
hird it is
Russia, on which Uzbekistan's economy depends the most (taking into account the volume of foreign trade, investment and remittances). The bulk of the Russian economy is linked to oil, and after falling demand for oil and a sharp decline in its price,
the recession in all areas of the Russian economy has been gaining momentum. There is also a depreciation of the national currencies of Russia and Kazakhstan.
The weakening economic growth in Russia and Kazakhstan may lead to a decrease in the income of Uzbek migrants to the country by $ 3.4 billion (5.9 percent of GDP).
Taking into account that income from remittances makes up 25.3 percent in the structure of total income of the population in Uzbekistan, this situation can have a significant impact on the decline in income and living standards of the bulk of the population.
Fourth, the crisis in neighboring partner countries may lead to a decrease in Uzbekistan's export volumes. Specifically, this process may affect a decrease in the volume of Uzbekistan's exports to Russia and Kazakhstan and, in turn, a decrease in the volume of currency in Uzbekistan. Given that the volume of Uzbekistan's exports to Russia is $2.5 billion, and to Kazakhstan - almost $1.5 billion, this is assumed to have a significant impact on the economy of Uzbekistan.
China is Uzbekistan's largest trading partner. Foreign trade turnover with China in 2019 amounted to $7.6 billion (18.1 percent
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of the total foreign trade turnover), exports - 2.5 billion, imports - $5.1 billion.
A decrease in demand for energy resources in China may lead to a decrease in the volume of Uzbekistan's exports to China, including a decrease in the volume of natural gas exports. Taking into account that Uzbekistan ranks third (14.1 percent) in the structure of exports of energy carriers and oil products (i.e. natural gas), 36.4 percent of the total volume of exports to China falls on the share of energy carriers and oil products. This suggests that this may lead to a reduction in foreign exchange earnings in Uzbekistan.
Fifth, the introduction of quarantine in all partner countries (China,
Foreign trade turnover with China in 2019 amounted to $7.6 billion, exports - 2.5 billion, imports - $5.1 billion.
Russia, Turkey, etc.), the occurrence of interruptions in the supply of products due to the closure of borders, can seriously damage the industrial network of Uzbekistan.
Specifically, a decrease in the supply of raw materials and components from China, an increase in transportation costs, interruptions in production support, are likely to cause serious damage to the industrial sector of Uzbekistan. For instance, China's share in the total volume of imports of machinery and equipment needed for Uzbekistan's industry is 30.9 percent. The
share of China is also large (24 percent) in the volume of imports of chemical products and products from them.
Sixth, some analysts note that the strict quarantine measures taken in Europe and other developed countries can cause serious problems with the cultivation of agricultural products (in particular, due to the fact that farmers (Poles, Romanians) who work in rural areas of developed European countries, leave the country), which, in turn, can lead to a shortage of agricultural products. Also, in
Strategy of Uzbekistan
Journal home page: https://journal.strategy.uz
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turn, Uzbekistan's neighbors have limited exports of some agricultural products (potatoes, wheat flour, buckwheat, sugar, etc.).
This may have an impact on Uzbekistan, lead to price hikes and food shortages.
Seventh, based on the experience of previous epidemics, some epidemiologists note that a new wave of coronavirus infection can occur in the fall months. This risk is likely to cause the need to improve the preparedness of the health care system in Uzbekistan, increase the number of hospitals and beds.
All of the above risks and threats will lead to a slowdown in the country's economic growth and a decrease in the standard of living of the population. To
implement fiscal measures to combat the pandemic and the resulting economic crisis, it is important
to attract funds from international financial organizations.
ON WHAT CONDITIONS THE FUNDS FROM INTERNATIONAL FINANCIAL ORGANIZATIONS SHOULD BE OBTAINED, AND HOW THEY SHOULD BE SPENT?
1
First, it is advisable to use these funds to stimulate economic activity and take measures to support employment.
In this context, it is necessary to:
Expand financing of small businesses, extend the grace period for loans;
Allocate certain amounts of loans to small businesses and individual entrepreneurs in industries affected
by quarantine, forced to suspend their activities;
Take measures to stimulate business entities that create jobs;
Expand the provision of concessional loans to compensate employees' wages, give up part of the loan for enterprises that do not fire their employees;
Introduce a system of issuing loans to business entities creating freelance
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Strategy of Uzbekistan Vs^0^
and remote jobs.
The funds allocated for these purposes will allow 9 million people who find themselves in difficult life situations to recover, that is, find a job, which will also raise employment.
Second, it is
advisable to take measures to stimulate exporting enterprises, to
allocate funds to reduce the cost of production.
Allocation of funds for these purposes will make exporters competitive in terms of prices for foreign products, and will lead to an increase in export volumes.
Third, it is
necessary to allocate funds for
"T" L-^ ^ funds allocated will I I I allow nine million people who find themselves
in difficult life situations to recover, that is, find a job.
■SN 2181-2535
measures to support industrial enterprises and local manufacturers affected by disruptions in production supplies. This poses a need to: Stimulate the localization of the production of raw materials and components;
Reimburse part of transportation costs;
Support domestic manufacturers through government incentives to reduce prices for vehicles and stimulate the replacement of household appliances with new ones for the population.
Fourth, there is a need to develop and finance a program of development of the agro-industrial complex and the food industry.
This will prevent a shortage of agricultural products in the country and, if necessary, increase export opportunities.
Also, it is vital to allocate funds to improve health system. This includes as follows:
Construction of additional clinics, hospitals and other medical institutions in regions of
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their shortage;
Purchase of medical equipment for clinics, hospitals and other medical institutions;
Repair of polyclinics, hospitals and other medical institutions in line with international standards, and creation of decent conditions in them;
Advanced training for doctors and nurses;
Increase of salaries and provision of financial incentives for medical workers;
Research and laboratory work in the field of medicine, creation of opportunities for work on test systems and vaccines;
Production of medicines, personal protective equipment and vaccines against coronavirus.
HOW TO PROVIDE SOCIAL ASSISTANCE TO LOW-INCOME POPULATION?
The country should develop and implement a Social Program, which includes a set of measures to mitigate the consequences of quarantine and crisis. In this case, it is necessary to ensure:
Issuance of one-time financial aid to low-income and vulnerable groups of the population;
Issuance of onetime cash payments to individuals (individual entrepreneurs, artisans, shoemakers, hairdressers, etc.), whose activities have been suspended due to quarantine, in the amount of the average monthly income (based on the territory);
Implementation of a grant program covering a certain percentage of employees' wages, if during the quarantine period business entities do not fire their employees and retain
them at the expense of wages;
Stimulation of housing construction and expansion of opportunities for its use;
Implementation of measures to provide housing for families in need;
Ensuring cheaper housing, expanding access to mortgage loans.
It is worth noting that onetime payments to low-income and vulnerable groups of the population (taking into account the rapid spending of funds by representatives of this stratum) contributes to the formation of demand due to the chain process in the economy and, consequently, a rapid economic recovery. Stimulation of housing construction in the country will create employment opportunities for the population, especially those who do not have knowledge and skills (hired workers, etc.).
