Uzbekistan: CA posts USD 201mn surplus in Q2

• Deficit equals 3.2% of GDP on 4-quarter rolling basis
• Large trade gap balanced by solid surplus in secondary income balance due to remittances
• Financial account posts USD 664mn outflows, banks and corporate agents with decisive role

Uzbekistan's current account posted USD 201mn surplus in Q2 2022, according to a BoP report published by the central bank. The result follows a revised USD 1bn deficit registered in Q1, while Q2 2021 saw USD 1.2bn deficit. As a whole, the present outcome reflects a significant surplus in the secondary income balance, which compensated a consistently solid trade deficit. On 4-quarter rolling basis, the overall CA deficit has dropped to USD 2.35bn or 3.2% of GDP, based on our calculations.

The Q2 data shows USD 4.27bn deficit in the trade balance, as opposed to USD 2.56bn in the respective period last year. The lack of gold exports this year is a major factor, which also accounts for the 30% q/q drop in exports. Textiles persisted as Uzbekistan's major export commodity, followed by non-precious metals and agricultural products. Global inflationary pressures contribute as well, maintaining elevated import levels. The services deficit (USD 654mn) was slightly lower than in Q1, which is not surprising in the context of more active tourism and travelling by Russians.

Meanwhile, the primary income balance saw a much more limited surplus despite consistent numbers of migrant labourers. Their impact was curbed by higher dividend payments and the total surplus was reduced to USD 23mn. The secondary income balance in turn posted solid USD 4.45bn surplus. We remind that remittance inflows in Q2 were unusually elevated due to transaction restrictions in neighbouring countries, which forced their citizens working abroad to transfer money to Uzbekistan. In addition, the number of Uzbek workers in Russia remained stable despite the international sanctions and remittances were generally up 96% y/y in H1.

The financial account (ex. reserves) registered USD 664mn outflows, compared to USD 1bn inflows in Q1 and USD 2.1bn inflows in Q2 2021. Foreign direct investment increased to almost USD 600mn (from USD 306mn in Q1), but the 'other investment' category provided the main impact. While it did register greater liabilities (mostly in the financial and corporate sectors), the parallel spike in asset acquisition by deposit-taking corporations and non-financial organisations was decisive. The central bank's assets in turn rose by USD 190.56mn, whereas net errors and omissions added USD 652.57mn to outflows.