BAKU, Azerbaijan, August 4. Uzbekistan entered the second half of 2026 with one of the strongest economic performances in Central Asia, reinforcing its position among the region's fastest-growing economies. Real gross domestic product (GDP) expanded by 8.5% year on year during the first six months of the year, reaching 1.073 quadrillion soums (approximately $89.5 billion). Beyond the headline figure, however, the latest data point to a broader structural transformation, with growth increasingly supported by industry, services, construction and digital sectors rather than a single source of expansion.
This increasingly diversified growth model has helped reduce dependence on traditional sectors while strengthening the economy's resilience to external shocks. Nevertheless, persistent inflationary pressures, geopolitical uncertainty and global market volatility continue to test policymakers' ability to sustain rapid growth while preserving macroeconomic stability.
Growth becomes increasingly diversified
The first-half GDP data illustrate that Uzbekistan's economy is becoming more balanced across sectors. Services remained the country's largest economic pillar, accounting for 50.8% of GDP, while industry increased its share to 26.5%. Agriculture, forestry and fisheries contributed 15%, and construction represented 7.7% of total output.
More importantly, the fastest-growing sectors were not traditional industries but modern services and infrastructure. Transportation, storage, information and communications expanded by 18.6%, while information and communications services alone grew by 23.2%. Construction increased 13.7% and trade, accommodation and food services expanded 13.5%, both significantly outpacing overall economic growth.
This pattern indicates that Uzbekistan's expansion is no longer driven primarily by agriculture or commodity production. Instead, investment in infrastructure, logistics, digital services and manufacturing is becoming an increasingly important source of value creation.
The industrial sector also demonstrated relatively broad-based growth. Manufacturing increased by 8.8%, electricity, gas and steam supply expanded by 7.9%, while water supply and waste management recorded growth of 15.9%. Although mining grew more modestly at 2.1%, overall industrial performance continued to support the country's broader economic transformation.
Digital economy gains strategic importance
One of the most notable developments is the increasing contribution of the information and communications technology (ICT) sector.
Its share of GDP rose to 2.9% during the first half of 2026, compared with 2.8% a year earlier and 2.4% in 2024. While the increase may appear gradual, it reflects a consistent shift toward higher-value economic activities.
Within the ICT sector, computer programming, consulting and related services accounted for more than half of total value added, considerably exceeding the contribution of traditional telecommunications. This suggests that Uzbekistan's digital economy is evolving beyond communications infrastructure toward software development, IT services and knowledge-based activities.
The expansion of ICT is particularly significant because digital industries generally tend to support higher productivity and value creation, create skilled employment and improve competitiveness across other sectors of the economy. Continued investment in digital infrastructure therefore has the potential to amplify economic growth well beyond the direct contribution of the sector itself.
Investment, construction and entrepreneurship remain central
Another defining feature of Uzbekistan's economic performance is the continued strength of investment-driven growth.
Construction remained among the fastest-growing sectors, supported by strong expansion across specialized construction activities, civil engineering and building construction. This reflects sustained investment in housing, industrial facilities and infrastructure projects that continue to underpin domestic economic activity.
At the same time, entrepreneurship continues to play a critical role. Small businesses generated more than half of the country's gross value added during the reporting period, accounting for 50.5% of the total. Their contribution remained particularly dominant in agriculture and construction, highlighting the importance of private enterprise for employment creation, regional development and domestic demand.
The country's investment momentum is supported by several complementary sources. Government infrastructure spending continues to underpin construction and industrial development, private businesses remain central to domestic economic activity, while banking reforms and privatization are expected to encourage greater foreign investment and private-sector participation.
The continued expansion of small businesses also suggests that economic reforms aimed at supporting private-sector activity are gradually broadening the country's production base beyond large state-owned enterprises.
Formalization strengthens the economy
The latest GDP data also reveal another important structural trend that often receives less attention than headline growth figures.
The share of Uzbekistan's non-observed economy declined from 26.1% during the first half of 2025 to 22.9% in the corresponding period of 2026. This reduction reflects continued progress in formalizing economic activity, improving tax compliance and integrating household production into the official economy.
A shrinking shadow economy has implications that extend beyond statistical improvements. Greater formalization generally broadens the tax base, improves the effectiveness of public policy and increases access to financing for businesses operating within the legal economy. Over time, these developments can strengthen productivity and support more sustainable long-term growth.
Fiscal policy supports growth while preserving stability
Alongside structural changes in the private sector, government policy continues to play a central role in shaping Uzbekistan's growth trajectory.
While monetary policy remains restrictive to contain inflation, fiscal policy continues to support economic activity through sustained public investment. Together, these policies illustrate Uzbekistan's effort to balance rapid economic expansion with price and fiscal stability.
Rapid economic expansion has also been accompanied by a relatively cautious fiscal strategy. Unlike many emerging economies that rely on widening budget deficits to stimulate growth, Uzbekistan aims to expand public investment while maintaining fiscal discipline.
The government's Fiscal Strategy for 2027–2029 projects consolidated budget expenditures to increase from 638.4 trillion soums (about $53.5 billion) in 2026 to 851.7 trillion soums (around $71.3 billion) by 2029, reflecting continued investment in infrastructure, public services and development programs. At the same time, authorities plan to keep the consolidated fiscal deficit at 3% of GDP throughout the forecast period, in line with the country's fiscal rule.
The strategy also envisages gradual improvements in public finances. The primary deficit is expected to narrow from 1.9% of GDP in 2026 to 1.6% by 2029, while revenues are projected to grow broadly in line with expenditures, helping maintain the revenue-to-GDP ratio at around 24%.
Rather than relying on excessive borrowing to sustain growth, the government appears to be pursuing a model in which expanding revenues finance higher public investment. This approach supports infrastructure development, promotes economic diversification, and helps preserve fiscal sustainability.
Inflation presents the principal macroeconomic challenge
Despite the strong economic performance, policymakers continue to face an increasingly delicate balancing act.
The Central Bank of Uzbekistan left its key interest rate unchanged at 14% in July, arguing that the current monetary stance remains sufficiently restrictive to guide inflation toward its medium-term target of 5%.
Annual inflation accelerated to 6.4% in June, driven primarily by increases in regulated electricity and natural gas tariffs, together with the liberalization of coal prices. Core inflation reached 6.9%, indicating that price pressures extend beyond temporary seasonal factors.
The central bank acknowledged that robust domestic demand, rapid investment growth and strong consumer spending continue to support GDP expansion while simultaneously contributing to inflationary pressures.
Maintaining relatively tight monetary policy therefore reflects an effort to preserve macroeconomic stability while avoiding unnecessary pressure on economic growth.
Medium-term outlook
Despite mounting external risks, Uzbekistan's medium-term outlook remains optimistic. The Ministry of Economy and Finance expects GDP growth to moderate from 8.1% in 2026 to between 6.9 and 7.4% through 2029, with industry and services continuing to serve as the main engines of expansion. At the same time, authorities expect public debt to remain broadly stable at around 31–32% of GDP, reflecting efforts to balance investment with fiscal sustainability. The projected moderation in growth should not necessarily be interpreted as a slowdown in economic performance but rather as a normalization following several years of exceptionally rapid expansion.
The government's projections are broadly consistent with independent forecasts. The Eurasian Development Bank forecasts 7.9% growth in 2026 and expects Uzbekistan to maintain one of the fastest growth rates in the region over the following years, citing strong investment, fiscal support and resilient domestic demand. The close alignment between official and independent forecasts suggests growing confidence that Uzbekistan's recent economic performance is underpinned by structural reforms rather than temporary cyclical factors.
Continued banking-sector restructuring and the planned privatization of major state-owned banks are expected to further strengthen private-sector participation and improve financial intermediation, supporting the country's longer-term growth objectives.
The first-half GDP figures indicate that Uzbekistan's economic transformation is gathering pace. Growth is becoming increasingly diversified, supported by expanding manufacturing, modern services, digitalization and sustained investment, while prudent fiscal and monetary policies aim to preserve macroeconomic stability. Although inflationary pressures and external uncertainties remain significant challenges, the broad agreement between government projections and international forecasts suggests that Uzbekistan is well positioned to remain one of the fastest-growing economies in Central Asia. The next phase of growth will be about quality rather than speed.
